Table of 8,107,500 shares of common stock at an offering price of $17.00 per share, which included the exercise in full by the underwriters of their option to purchase up to 1,057,500 additional shares of common stock. We received gross Contents

proceeds of approximately ~~$137.8~~$611.4 million ~~before~~through the issuance of our common stock after deducting underwriting discounts, commissions and offering related transaction costs. InAs noted above, we also received $100.0 million from an asset sale, specifically in connection with the IPO, the Company’s outstanding shares of convertible preferred stock were automatically converted into 17,406,338 shares of common stock. The financial statements as of September 30, 2017, including share and per share amounts, do not include the effects of the IPO.PRV Transfer. We will not generate significant revenue from product sales until we are able to successfully ~~complete development~~establish a marketing and ~~obtain regulatory approval~~commercialization infrastructure for ~~setmelanotide, which we expect will take a number~~IMCIVREE. IMCIVREE became commercially available to patients 6 years of ~~years~~age and ~~is subject~~older with obesity due to ~~significant uncertainty.~~POMC, PCSK1 or LEPR deficiency in the U.S. in the first quarter of 2021. We expect to continue to fund our operations through the sale of equity, debt financings or other sources. We intend to build our own marketing and commercial sales infrastructure and we may enter into collaborations with other parties for certain markets outside the United States. However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms, or at all. If we fail to raise capital or enter into such other arrangements as, and when, needed, we may have to significantly delay, scale back or discontinue the development or commercialization of setmelanotide.

As of ~~September 30, 2017,~~March 31, 2021 we had an accumulated deficit of ~~$99.7~~$415.6 million. Our net ~~losses~~income (losses) were ~~$10.0 million, $23.2 million, $6.4~~$43.8 million and ~~$17.5~~($34.2) million for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2021 and ~~2016,~~2020, respectively. We expect to continue to incur significant expenses and increasing operating losses over the foreseeable future. We expect our expenses will increase substantially in connection with our ongoing activities, as we:

●

continue to conduct clinical trials for setmelanotide;

●

engage contract manufacturing organizations, or CMOs, for the manufacture of ~~setmelanotide for~~ clinical ~~trials;~~

and commercial-grade setmelanotide;

●

seek regulatory approval for ~~setmelanotide;~~

setmelanotide for additional indications;

●

expand our clinical, regulatory, commercial and ~~financial~~corporate infrastructure and expand operations ~~and build a marketing and commercialization infrastructure; and~~

globally;

●

engage in the sales and marketing efforts necessary to support the continued commercial efforts of IMCIVREE globally;

●

the levels, timing and collection of revenue earned from sales of IMCIVREE and other products approved in the future, if any; and

●

continue to operate as a public company.

As of ~~September 30, 2017,~~March 31, 2021, our existing cash and cash equivalents and ~~short‑term~~short-term investments were approximately ~~$30.4 million and after giving effect to the aggregate net proceeds from our IPO in October 2017, $156.2~~$404.8 million. We expect that ~~the net proceeds of this offering~~our existing cash and cash equivalents and short-term investments will enable us to fund our operating expenses into at least the ~~first~~second half of ~~2019~~.2023.

Corporate Background ~~and Distribution~~

We are a Delaware corporation organized in February 2013 under the name Rhythm Metabolic, Inc., and as of October 2015, under the name Rhythm Pharmaceuticals, Inc. ~~Prior~~

Impact of COVID-19

We are closely monitoring how the spread of COVID-19 is affecting our employees, business, preclinical studies and clinical trials. In response to the COVID-19 pandemic, we have limited access to our ~~organization~~executive offices with most employees continuing their work outside of our offices and travel has been restricted. We have recently updated our timelines on the Basket Study but the changes were unrelated to COVID-19. We are continuing our regular interactions with the FDA and EMA, and based on current information we do not currently anticipate any disruption in the clinical supply of setmelanotide. Our CMOs have indicated that they have appropriate plans and procedures in place to ensure uninterrupted future supply of clinical and commercial-grade setmelanotide, subject to potential limitations on their operations due to COVID-19. As a result, we do not currently expect that the COVID-19 pandemic will have a material

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impact on our business, results of operations and financial condition. At this time, however, there is still uncertainty relating to the trajectory of the pandemic and the ~~Corporate Reorganization referred to below,~~impact of related responses, and disruptions caused by the COVID-19 pandemic have resulted and may in the future result in difficulties or delays in initiating, enrolling, conducting or completing our planned and ongoing clinical trials and the incurrence of unforeseen costs as a result of disruptions in clinical supply or preclinical study or clinical trial delays. For example, we ~~were part~~experienced interruption of ~~Rhythm Pharmaceuticals, Inc., a Delaware corporation~~key clinical trial activities, such as patient attendance and clinical trial site monitoring, in our Phase 3 clinical trial evaluating setmelanotide for the treatment of insatiable hunger and severe obesity in individuals with BBS or Alström syndrome. The impact of COVID-19 on our future results will largely depend on future developments, which ~~was organized in November 2008~~are highly uncertain and ~~which commenced active operations in 2010. We refer to this corporation~~cannot be predicted with confidence, such as the ~~Predecessor Company.~~

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~~In March 2013, the Predecessor Company underwent a corporate reorganization, which we refer to as the Corporate Reorganization, pursuant to which all~~ultimate geographic spread of the ~~outstanding equity securities~~disease, the duration of the ~~Predecessor Company were exchanged for units~~pandemic, travel restrictions and social distancing in the United States and other countries, business closures or business disruptions, the ultimate impact on financial markets and the global economy, the effectiveness of ~~Rhythm Holding Company, LLC, a newly‑organized limited liability company, which we refer~~vaccines and vaccine distribution efforts and the effectiveness of other actions taken in the United States and other countries to ascontain and treat the ~~LLC entity. After the consummation~~disease. See “Risk Factors—The COVID-19 pandemic has and may continue to adversely impact our business, including our preclinical studies, clinical trials and our commercialization prospects.” in Part II, Item 1A of this exchange and as part of the Corporate Reorganization, the Predecessor Company contributed setmelanotide and the MC4R agonist program to us and distributed to the LLC entity all of the then issued and outstanding shares of our stock. The result of the Corporate Reorganization was that we and the Predecessor Company became wholly‑owned subsidiaries of the LLC entity and the two product candidates and related programs that were originally held by the Predecessor Company were separated, with relamorelin and the ghrelin agonist program being retained by the Predecessor Company and setmelanotide and the MC4R agonist program being held by us. We refer to the Predecessor Company after consummation of the Corporate Reorganization as the Relamorelin Company. The Predecessor Company filed the Investigational New Drug Application, or IND, for setmelanotide in October 2011 and conducted the setmelanotide clinical trials up until the Corporate Reorganization, after which all clinical trials have been conducted by us.

In October 2014, the LLC entity granted to Actavis plc, now owned by Allergan, Inc., or Allergan, an exclusive option to acquire the Relamorelin Company. The transaction was limited to the acquisition of the Relamorelin Company and did not include our company. In October 2016, the option to acquire the Relamorelin Company was exercised and the sale to Allergan closedQuarterly Report on ~~December 15, 2016.~~

In August 2015, December 2015, January 2017 and August 2017, we sold 25,000,000 shares, 15,000,000 shares, 20,475,001 shares and 20,474,998 shares, respectively, of our series A convertible preferred stock to certain investors. Following the closing of our series A convertible preferred stock financings, the LLC entity remained our largest stockholder, with the balance of our stock being owned by our series A investors. In August 2017, the LLC entity exchanged 8,578,646 of its shares of our common stock for 78,666,209 newly‑issued shares of our series A‑1 junior preferred stock and the LLC entity distributed all of its shares of our series A‑1 junior preferred stock to the holders of its preferred units and the remaining 1,617,646 shares of our common stock to the holders of its common units. We refer to the exchange and distribution as the Distribution. The series A‑1 junior preferred stock converted into shares of our common stock on a 9.17‑for‑1 basis upon the closing of our IPO. Following the Distribution, the LLC entity did not own any of our common stock.

In connection with our IPO, we effected a 1‑for‑9.17 reverse stock split of our outstanding common stock on September 29, 2017. All share and per share amounts in the financial statements have been retrospectively adjusted for all periods presented to give effect of the reverse stock split.

~~On October 13, 2015, the Relamorelin Company changed its name to Motus Therapeutics, Inc. and we changed our name to Rhythm Pharmaceuticals, Inc.~~

~~We shared certain costs with the Relamorelin Company and effective December 2016 in connection with the sale of the Relamorelin Company, we no longer share these costs.~~Form 10-Q.

Financial Operations Overview

Revenue

To date, we have not generated ~~any~~significant revenue from product sales. Our lead product candidate, IMCIVREE, was recently approved by the FDA for chronic weight management in adult and pediatric patients six years of age and older with obesity due to POMC, PCSK1 or LEPR deficiency confirmed by genetic testing. IMCIVREE became commercially available in the U.S. in the first quarter of 2021. We recorded our first sales of IMCIVREE in March 2021. We expect our initial sales of IMCIVREE will be limited by the ultra-rare nature of the disease and ~~do not~~limited number of diagnosed patients in the United States.

Cost of sales

All of our inventory of IMCIVREE produced prior to FDA approval is available for commercial or clinical use. Most of the manufacturing costs have been recorded as research and development expenses in prior periods. Accordingly, the costs for IMCIVREE included in our cost of sales for the three months ended March 31, 2021 were insignificant. We expect cost of sales to ~~generate any revenue from the sale of setmelanotide for at least several years. We cannot predict if, when, or~~increase as we begin to ~~what extent~~sell inventory that is produced after we ~~will generate revenues from the commercialization and sale of setmelanotide. Setmelanotide~~begin capitalizing IMCIVREE commercial inventory. The Company is currently ~~our only~~evaluating the impact of this previously expensed inventory on the future cost of product ~~candidate, and we may never succeed in achieving regulatory approval for setmelanotide or any other product candidate that we decide to pursue in the future.~~

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sales.

Research and development expenses

Research and development expenses consist primarily of costs incurred for our research activities, including our drug discovery and genetic sequencing efforts, and the clinical development of setmelanotide, which include:

●

expenses incurred under agreements with third parties, including CROs that conduct research and development and preclinical activities on our behalf, and the cost of consultants and CMOs that manufacture drug products for use in our preclinical studies and clinical trials;

●

~~employee‑related~~employee-related expenses including salaries, benefits and ~~stock‑based~~stock-based compensation expense;

●

the cost of lab supplies and acquiring, developing and manufacturing preclinical and clinical study materials; ~~and~~

●

the cost of genetic sequencing of potential patients in clinical studies; and

●

facilities, depreciation, and other expenses, which include rent and maintenance of facilities, insurance and other operating costs.

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We expense research and development costs to operations as incurred. Nonrefundable advance payments for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses. The capitalized amounts are expensed as the related goods are delivered or the services are performed.

The following table summarizes our current research and development ~~program for setmelanotide.~~expenses:

Three Months Ended

Nine Months Ended

September 30,

September 30,
Research and Development Summary


2017

2016

2017

2016

(in thousands)
Setmelanotide Program

$
5,971

$
5,419

$
16,241

$
13,963

We are unable to predict the duration and costs of the current or future clinical trials of ~~setmelanotide.~~our product candidates. The duration, costs, and timing of clinical trials and development of setmelanotide will depend on a variety of factors, including:

●

the scope, rate of progress, and expense of our ongoing, as well as any additional, clinical trials and other research and development activities;

●

the rate of enrollment in clinical trials;

●

the safety and efficacy demonstrated by setmelanotide in future clinical trials;

●

changes in regulatory requirements;

●

changes in clinical trial design; and

●

the timing and receipt of any regulatory approvals.

A change in the outcome of any of these variables with respect to the development of ~~setmelanotide~~our product candidates would significantly change the costs and timing associated with its development and potential commercialization.

Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of ~~later‑stage~~later-stage clinical trials. We expect research and development costs to increase significantly for the foreseeable future as our setmelanotide and other development ~~program progresses.~~programs progress. However, we do not believe that it is possible at this time to accurately project total ~~program‑specific~~program-specific expenses to commercialization and there can be no guarantee that we can meet the funding needs associated with these expenses.

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~~General~~Selling, general and administrative expenses

Selling expenses consist of professional fees related to preparation for the eventual commercialization of setmelanotide, as well as salaries and related benefits for commercial employees, including stock-based compensation. As we accelerate our preparation for commercialization and start to market setmelanotide and as we explore new collaborations to develop and commercialize setmelanotide, we anticipate that these expenses will materially increase.

General and administrative expenses consist primarily of salaries and other related costs, including ~~stock‑based~~stock-based compensation, relating to our ~~full‑time~~full-time employees ~~and until December 2016, for personnel which have been allocated from the Relamorelin Company.~~not involved in R&D or commercial activities. Other significant costs include rent, ~~which previously had been allocated from the Relamorelin Company,~~ legal fees relating to patent and corporate matters and fees for accounting and consulting services.

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The following table summarizes our current selling, general and administrative ~~expenses.~~expenses:

Three Months Ended

Nine Months Ended

September 30,

September 30,


2017

2016

2017

2016

(in thousands)
General and administrative expense

$
2,315

$
982

$
5,188

$
3,567

We anticipate that our selling, general and administrative expenses will increase in the future to support continued and expanding development efforts, ~~potential~~ commercialization of ~~setmelanotide~~IMCIVREE in the United States and the European Union as well as increased costs of operating as a global commercial stage biopharmaceutical public company. These increases will likely include increased costs related to the hiring of additional personnel and fees to outside consultants, lawyers and accountants, ~~costs of~~ compliance with exchange listing ~~rules~~ and ~~U.S. Securities and Exchange Commission, or~~ SEC ~~rules,~~expenses, insurance and investor relations costs, among other expenses.

Critical Accounting Policies and Estimates

Our management’s discussion and analysis of our financial condition and results of operations are based on our financial statements, which we have prepared in accordance with accounting principles generally accepted in the United States, ~~generally accepted accounting principles.~~or GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting periods. OnThese items are monitored and analyzed by us for changes in facts and circumstances on an ongoing basis, ~~we evaluate our~~and material changes in these estimates ~~and judgments, including those described~~could occur in ~~greater detail below.~~the future. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

~~While~~Other than adopting ASC Topic 606, Revenue from Contracts with Customers, as of January 1, 2021, during the three months ended March 31, 2021, there were no other significant changes to our ~~significant~~critical accounting policies ~~are described~~as reported in ~~more detail in the notes to~~ our ~~financial statements included elsewhere in this Quarterly~~Annual Report on Form ~~10-Q, we believe that the following accounting policies are the most critical to aid in fully understanding and evaluating our financial condition and results of operations.~~

~~Basis of Presentation~~

~~Presentation~~

We have historically existed and functioned as part of the consolidated businesses of the Predecessor Company. Our MC4 business was contributed to us from the Predecessor Company on March 21, 2013 as part of the Corporate Reorganization. At that time, we also entered into the Payroll Services Agreement. In December 2016, the shared employees terminated their existing employment agreements and entered into new agreements with us. Until December 2016, we shared costs with the Relamorelin Company, including finance, accounting, research and development and operations. These shared costs were allocated to us from the Relamorelin Company10-K for the purposes of preparing the financial statements based on a specific identification basis or, when specific identification is not practicable, a proportional cost allocation method which allocates expenses based upon the percentage of employee time and research and development effort expended on our business as compared to total employee time and research and development effort. The proportional use basis adopted to allocate shared costs is in accordance with the guidance of Staff Accounting Bulletin Topic 1B. Our management has determined that the proportional use method of allocating costs to us from the Relamorelin Company is reasonable.

fiscal year ended December 31, 2020.

2322

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~~Accrued research and development expenses~~

As part of the process of preparing our financial statements, we are required to estimate the value associated with goods and services received in the period in connection with research and development activities. This process involves reviewing quotations and contracts, identifying services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of the actual cost, or alternatively, the deferral of amounts paid for goods or services to be incurred in the future. The majority of our service providers invoice us monthly in arrears for services performed or when contractual milestones are met. We make estimates of our accrued expenses or prepaid expenses as of each balance sheet date in our financial statements based on facts and circumstances known to us at the time those financial statements are prepared. We periodically confirm the accuracy of our estimates with the service providers and make adjustments if necessary. The significant estimates in our accrued research and development expenses include fees paid to CROs and CMOs in connection with research and development activities.

We accrue our expenses related to CROs and CMOs based on our estimates of the services received and efforts expended pursuant to quotes and contracts with CROs and CMOs that conduct research and development and manufacturing on our behalf. The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows. The allocation of CRO upfront expenses for both clinical trials and preclinical studies generally tracks actual work activity. However, there may be instances in which payments made to our vendors will exceed the level of services provided and result in a prepayment of the research and development expense. In accruing service fees delivered over a period of time, we estimate the time period over which services will be performed and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust accrued or prepaid expense accordingly. Although we do not expect our estimates to be materially different from amounts actually incurred, if our estimates of the status and timing of services performed differ from the actual status and timing of services performed, it could result in us reporting amounts that are too high or too low in any particular period. To date, there have been no material differences between our estimates of such expenses and the amounts actually incurred.

~~2017 Series A Investor Instrument~~

We have classified our 2017 Series A Investor Instrument (See Note 4 to our financial statements included elsewhere in this Quarterly Report on Form 10-Q) as a liability as it is a free‑standing financial instrument. The 2017 Series A Investor Instrument was recorded at fair value upon the issuance of our series A preferred stock in January 2017, and subsequently remeasured to fair value at each reporting period. Changes in fair value of this financial instrument is recognized as a component of other income (expense), net in the statement of operations and comprehensive loss. The fair value of the Series A Investor Instrument is determined to be the sum of the fair values of the 2017 Series A Investor Right/Obligation and the 2017 Investor Call Option. We estimated the fair value of the 2017 Series A Investor Right/Obligations as the probability‑weighted present value of the expected benefit of the investment.

We used the Black‑Scholes option‑pricing model, which incorporates assumptions and estimates, to value the 2017 Series A Investor Call Option and assessed these assumptions and estimates on a quarterly basis as additional information impacting the assumptions was obtained. Estimates and assumptions impacting the fair value measurement include the fair value per share of the underlying series A preferred stock, the expected term of the 2017 Series A Investor Call Options, risk‑free interest rate, expected dividend yield and expected volatility of the price of the underlying preferred stock. We determined the fair value per share of the underlying preferred stock by taking into consideration the most recent sale of our convertible preferred stock and the investors' right to invest in a subsequent tranche. As we are a private company and lack company‑specific historical and implied volatility information of our stock, we estimated our expected stock volatility based on the historical volatility of publicly traded peer companies for a term comparable to the estimated term of the 2017 Series A Investor Call Options. The risk‑free interest rate was determined by reference to the U.S. Treasury yield curve for time periods approximately equal to the estimated term of the 2017 Series A Investor Call Options. A dividend yield of zero was assumed.

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~~Stock-based compensation~~

Prior to August 2015, we did not have our own equity compensation plan. In August 2015, our Board of Directors and our stockholders approved and we adopted the 2015 equity incentive plan, as amended and in effect prior to the closing of our IPO, or the 2015 Plan, which we terminated upon consummation of our IPO and replaced with the 2017 equity incentive plan, or the 2017 Plan. The 2017 Plan provides for the grant of incentive and non-qualified stock options and restricted stock and stock grants to employees, consultants, advisors and directors, as determined by the Board of Directors. We have reserved 4,018,538 shares of common stock under the 2017 Plan. The first option grants issued by us under the 2015 Plan were issued in the fourth quarter of 2015. Shares of common stock issued upon exercise of stock options are generally issued from authorized but unissued shares. The 2015 Plan provides that the exercise price of incentive stock options cannot be less than 100% of the fair market value of the common stock on the date of the award for participants who own less than 10% of the total combined voting power of stock, and not less than 110% for participants who own more than 10% of the voting power. Options and restricted stock granted under the 2015 Plan will vest over periods as determined by our Compensation Committee and approved by our Board of Directors.

We estimate the fair value of our stock-based awards to employees and non-employees using the Black-Scholes option-pricing model, which requires the input of highly subjective assumptions, including (a) the expected volatility of our stock, (b) the expected term of the award, (c) the risk-free interest rate, and (d) expected dividends. Due to the lack of a public market for the trading of our common stock and a lack of company-specific historical and implied volatility data, we have based our estimate of expected volatility on the historical volatility of a group of companies in the pharmaceutical and biotechnology industries in a similar stage of development as us and that are publicly traded. For these analyses, we have selected companies with comparable characteristics to ours including enterprise value, risk profiles and with historical share price information sufficient to meet the expected life of the stock-based awards. We compute the historical volatility data using the daily closing prices for the selected companies' shares during the equivalent period of the calculated expected term of our stock-based awards. We will continue to apply this process until a sufficient amount of historical information regarding the volatility of our own stock price becomes available. We have estimated the expected life of our employee stock options using the "simplified" method, whereby, the expected life equals the average of the vesting term and the original contractual term of the option. The risk-free interest rates for periods within the expected life of the option are based on the U.S. Treasury yield curve in effect during the period the options were granted. Upon adopting ASU 2016-09, ~~Improvements to Employee Share‑Based Payment Accounting (Topic 718)~~ ~~on January 1, 2017, we have elected to account for forfeitures as they occur.~~

~~Income taxes~~

Income taxes have been calculated on a separate tax return basis. Certain of our activities and costs have been included in the tax returns filed by the Relamorelin Company and the LLC entity. Prior to the Corporate Reorganization, our operations were included in the tax returns filed by the Predecessor Company. We have filed tax returns on our own behalf since the Corporate Reorganization.

~~We account for uncertain tax positions in accordance with the provisions of Accounting Standards Codification, or ASC, Topic 740,~~ ~~Accounting for Income Taxes~~, or ASC 740. When uncertain tax positions exist, we recognize the tax benefit of tax positions to the extent that the benefit will more likely than not be realized. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances. As of December 31, 2016, we do not have any uncertain tax positions.

Income taxes are recorded in accordance with ASC 740, which provides for deferred taxes using an asset and liability approach. We recognize deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. We determine our deferred tax assets and liabilities based on differences between financial reporting and tax bases of assets and liabilities, which are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Valuation allowances are provided, if based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

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As of December 31, 2016, we had net operating loss carryforwards to reduce federal and state incomes taxes of approximately $46,934 and $24,432, respectively. If not utilized, these carryforwards begin to expire in 2033. At December 31, 2016, we also had available research and development tax credits for federal and state income tax purposes of approximately $971 and $369, respectively. The federal and state credits begin to expire in 2033 and 2028, respectively.

Utilization of the net operating loss and tax credit carryforwards may be subject to a substantial annual limitation due to ownership change limitations that have occurred previously or that could occur in the future, as provided by Section 382 of the Internal Revenue Code of 1986, as amended, or the Code, or Section 382, as well as similar state provisions and other provisions of the Code. Ownership changes may limit the amount of net operating losses and tax credit carryforwards that can be utilized annually to offset future taxable income and tax, respectively. In general, an ownership change, as defined by Section 382, results from transactions that increase the ownership of 5.0% stockholders in the stock of a corporation by more than 50% in the aggregate over a three-year period.

Results of Operations

Comparison of the three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016~~2020

The following table summarizes our results of operations for the three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016,~~2020, together with the changes in those items in dollars and as a percentage:

Three Months Ended

September 30,

Change


2017

2016

$

%

(in thousands)

Statement of Operations Data:

Operating Expenses:









Research and development

$
5,971

$
5,419

$
552

10
%
General and administrative

2,315

982

1,333

136
%
Total operating expenses

8,286

6,401

1,885

29
%
Loss from operations

(8,286)

(6,401)

(1,885)

29
%
Other (expense) income, net

(1,730)

10

(1,740)

NM
%
Net loss and comprehensive loss

$
(10,016)

$
(6,391)

$
(3,625)

57
%


	Three Months Ended
	March 31,				Change
	2021		2020		$		%

	(in thousands)
Statement of Operations Data:
Product revenue, net	$	35	$	—	$	35	NM	%
Costs and expenses:
Cost of sales		4		—		4	NM	%
Research and development		19,911		22,504		(2,593)	(12)	%
Selling, general, and administrative		14,518		12,796		1,722	13	%
Total costs and expenses		34,433		35,300		(867)	(2)	%
Loss from operations		(34,398)		(35,300)		902	(3)	%
Other income, net		100,154		1,136		99,018	NM	%
Income (loss) before taxes		65,756		(34,164)		99,920	(292)
Provision for income taxes		22,006		—		22,006	NM
Net income (loss)	$	43,750	$	(34,164)	$	77,914	(228)	%

NM=Not meaningful

Research and development expense. Research and development expense decreased by $2.6 million to $19.9 million in 2021 from $22.5 million in 2020, a decrease of 12%. The decrease was primarily due to the following:

●

a decrease of $1.6 million related to our clinical trials associated with setmelanotide. We completed the GO-ID genotyping study, the POMC and LEPR Phase 3 studies and the once weekly formulation Phase 2 study in early to mid-2020. These decreases were slightly offset by increases related to the expansion of the Phase 2 basket study and the start of a new renal insufficiency PK study in late 2020; and

●

a decrease of $1.7 million primarily related to purchases of setmelanotide API and drug product in first quarter of 2020 for clinical trials and preparation for potential commercialization.

The above decreases were partially offset by:

●

an increase of $0.7 million due to the hiring of additional full-time employees in order to support the growth of our research and development programs.

Selling, general and administrative expense. Selling, general and administrative expense increased by ~~$0.6~~$1.7 million to ~~$6.0~~$14.5 million in ~~2017~~2021 from ~~$5.4~~$12.8 million in ~~2016,~~2020, an increase of ~~10%~~13%. The increase was primarily due:

●

an increase of $1.6 million associated with the expenses incurred on the sale of our PRV to Alexion.

Other income, net. Other income increased by $99.0 million due primarily to the ~~initiation~~sale of ~~additional new clinical trials~~our PRV in ~~2017 and an increase in other development activities associated with setmelanotide, offset by~~February 2021.

Provision for income taxes. We recorded a tax provision of $22.0 million for the ~~completion of some pre-clinical research studies. We hired additional personnel in the clinical and development departments during the quarter~~period ended ~~September 30, 2017.~~

~~General and administrative expense.~~ ~~General and administrative expense increased by $1.3 million to $2.3 million in 2017 from $1.0 million in 2016, an increase of 136%. The increase was~~March 31, 2021, primarily ~~due to stock compensation expense~~ related to the ~~revaluation~~sale of ~~certain option grants~~our PRV, offset by a tax benefit from our ordinary losses. We expect to ~~our former president upon changing~~have sufficient tax losses in the current year to offset the income from ~~an employee~~the sale and thus no current year liability is expected.

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Net income (loss). Net income (loss) increased by $77.9 million to ~~nonemployee status, the legal costs related to the distribution~~$43.8 million in 2021, from a loss of ~~the LLC entity’s common shares to its members and general office expenses~~$34.2 million in 2020. The increase in net income was primarily due to the increase in ~~headcount during the quarter ended September 30, 2017.~~

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~~Comparison of nine months ended September 30, 2017 and 2016.~~

~~The following table summarizes our results of operations for the nine months ended September 30, 2017 and 2016, together with the changes in those items in dollars and as a percentage:~~

Nine Months Ended

September 30,

Change


2017

2016

$

%

(in thousands)

Statement of Operations Data:

Operating Expenses:









Research and development

$
16,241

$
13,963

$
2,278

16
%
General and administrative

5,188

3,567

1,621

45
%
Total operating expenses

21,429

17,530

3,899

22
%
Loss from operations

(21,429)

(17,530)

(3,899)

22
%
Other income (loss)

(1,749)

24

(1,773)

NM
%
Net loss and comprehensive loss

$
(23,178)

$
(17,506)

$
(5,672)

32
%

~~Research and development expense.~~ Research and development expense increased by $2.3 to $16.2 million in 2017 from $14.0 million in 2016, an increase of 16%. The increase was primarily due to the initiation of additional new clinical trials in 2017 and an increase in other ~~market development activities associated with setmelanotide. We hired additional personnel in the clinical operations department at the end of 2016 and throughout 2017.~~

~~General and administrative expense.~~ General and administrative expense increased by $1.6 million to $5.2 million in 2017 from $3.6 million in 2016, an increase of 45%. The increase was primarily due to stock compensation expense related to new option grants in 2017, legal costs related to the distribution of the LLC entity’s common shares to its members and general office expenses due to the increase in headcount at the end of 2016 and throughout 2017.income discussed above.

Liquidity and Capital Resources

As of September 30, 2017, our existing cash and cash equivalents and short‑term investments were approximately $30.4 million. After giving effect to the aggregate net proceeds of our IPO in October 2017 of $125.8 million,March 31, 2021, our cash and cash equivalents and ~~short‑term~~short-term investments ~~are $156.2 million as of September 30, 2017.~~were approximately $404.8 million.

Cash flows

The following table provides information regarding our cash flows for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2021 and ~~2016:~~2020:



							Three Months Ended March 31,
							2021		2020


	Nine Months Ended September 30,
	2017		2016		Change
	(in thousands)
							(in thousands)
Net cash provided by (used in):
Operating activities	$	(21,575)	$	(17,040)	$	(4,535)	$	(33,531)	$	(36,098)
Investing activities		1,407		(5,214)		6,621		(145,712)		28,873
Financing activities		41,542		—		41,542		165,585		707
Net increase (decrease) in cash and cash equivalents	$	21,374		(22,254)		43,628
Net decrease in cash, cash equivalents and restricted cash							$	(13,658)		(6,518)

Net cash used in operating activities

The use of cash in all periods resulted primarily from our net ~~losses~~income (loss) adjusted for ~~non‑cash~~non-cash charges and changes in components of working capital.

Net cash used in operating activities was ~~$21.6~~$33.5 million for the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2021 and consisted primarily of a net loss of ~~$19.6~~$28.9 million adjusted for ~~non‑cash~~non-cash items, which consisted of ~~stock‑based~~

~~Table~~non-cash stock-based compensation, the gain on the sale of ~~Contents~~

~~compensation,~~the PRV, a deferred provision for income taxes, depreciation and amortization and ~~deferred~~ rent ~~expense and the mark to market revaluation of the Series A Investor Instrument.~~expense. The change in operating assets and liabilities reflected a total use of cash of approximately ~~$1.9~~$6.3 million ~~mainly for deferred issuance costs~~from an increase in accounts payables and accrued expenses associated with our CROs, CMOs and consultants due to the timing of payments, offset by a decrease of $1.7 million in prepaid expenses.

Net cash used in operating activities was ~~$17.0~~$36.1 million for the ~~nine~~three months ended ~~September 30, 2016,~~March 31, 2020 and consisted primarily of a net loss of ~~$16.5~~$28.6 million adjusted for ~~non‑cash~~non-cash items, which consisted of ~~stock‑based~~non-cash stock-based compensation, depreciation and amortization and ~~deferred~~ rent expense. The ~~significant items in the~~ change in operating assets and liabilities ~~include~~reflected a ~~decrease in accrued expenses~~total use of ~~$0.3~~cash of approximately $7.5 million ~~and~~from an increase in ~~deferred issuance costs~~prepaid expenses and decreases in accounts payables and accrued expenses associated with our CROs, CMOs and consultants due to the timing of ~~approximately $0.3 million.~~payments.

Net cash (used in) provided by investing activities

Net cash ~~provided~~used in investing activities for the three months ended March 31, 2021 relates to the $245.7 million of net purchases of short-term investments, offset by ~~(used in) investing activities~~the $100.0 million in proceeds from the sale of the PRV.

Net cash provided by investing activities for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2020 relates to the net maturities of ~~short‑term investments of $1.4 million.~~short-term investments.

Net cash used in investing activities for the nine months ended September 30, 2016 relates to the net purchases of short‑term investments of $4.2 million and the buildout of our new headquarters facility and furniture and equipment of $1.0 million.

Net cash provided by financing activities

Net cash provided by financing activities was ~~$41.5~~$165.6 million for the ~~nine~~three months ended ~~September 30, 2017, and~~March 31, 2021, which represents the net proceeds of $161.7 million from our common stock offering in February 2021 and $3.9 million of cash proceeds from the ~~first~~exercise of stock options and ~~second tranche of our~~the issuance of ~~series A preferred~~common stock ~~in January~~from the ESPP.

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Net cash provided by financing activities was $0.7 million for the three months ended March 31, 2020, which represents net proceeds from purchases made under our 2017 Employee Stock Purchase Plan and ~~August 2017, respectively.~~proceeds from the exercise of stock options.

Funding requirements

We expect our expenses to increase in connection with our ongoing activities, particularly as we continue the clinical development of and seek marketing approval for ~~setmelanotide.~~setmelanotide for future indications, and build out our global organization. In addition, ~~if we obtain marketing approval for setmelanotide,~~ we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution to the extent that such sales, marketing and distribution are not the responsibility of potential collaborators. We also expect to incur additional costs associated with operating as ~~an independent company, and upon the closing of our IPO and operating as~~ a public company.

We expect that ~~the net proceeds from our IPO, together with~~ our existing cash and cash equivalents and short-term investments will enable us to fund our operating expenses into at least ~~through 2018.~~the second half of 2023. We may need to obtain substantial additional funding in connection with our research and development activities and any continuing operations thereafter. If we are unable to raise capital when needed or on favorable terms, we would be forced to delay, reduce or eliminate our research and development programs or future commercialization efforts.

Our future capital requirements will depend on many factors, including:

●

the cost to commercialize setmelanotide, by building an internal sales force or entering into collaborations with third parties and providing support services for patients;

●

the scope, progress, results and costs of clinical trials for our setmelanotide program;

●

the costs, timing and outcome of regulatory review of our setmelanotide program;

●

the obligations owed to Ipsen Pharma S.A.S., or Ipsen, Camurus AB, or Camurus, and Takeda pursuant to our license ~~agreement;~~

agreements;

●

the extent to which we acquire or ~~in‑license~~in-license other product candidates and technologies;

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●

the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual ~~property‑related~~property-related claims; ~~and~~

●

our ability to establish and maintain additional collaborations on favorable terms, if at ~~all.~~

all; and

●

the costs of operating as a public company, including those resulting from losing our emerging growth company status.

~~Developing~~Although IMCIVREE has been approved by the FDA in certain indications, IMCIVREE may not achieve commercial success. In addition, developing our setmelanotide program is a ~~time‑consuming,~~time-consuming, expensive and uncertain process that may take years to complete, and we may never generate the necessary data or results required to obtain future marketing ~~approval~~approvals and achieve product sales. In addition, setmelanotide, if approved, may not achieve commercial success. Our commercial revenues, if any, will be derived from sales of setmelanotide that we do not expect to be commercially available for several years, if at all. Accordingly, we will need to continue to rely on additional financing to achieve our business objectives. Adequate additional financing may not be available to us on acceptable terms, or at all.

In addition, the magnitude and duration of the COVID-19 pandemic and its impact on our liquidity and future funding requirements is uncertain as of the filing date of this Quarterly Report as this continues to evolve globally. See “Impact of COVID-19” above and “Risk Factors— The COVID-19 pandemic has and may continue to adversely impact our business, including our preclinical studies, clinical trials and our commercialization prospects.” in Part II, Item 1A of this Quarterly Report for a further discussion of the possible impact of the COVID-19 pandemic on our business.

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Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances and licensing arrangements. In August 2015, December 2015, January 2017 and August 2017, respectively, we issued 25,000,000, 15,000,000, 20,475,001 and 20,474,998, shares of series A preferred stock, respectively, at a price of $1.00 per share, resulting in gross proceeds of $81.0 million.

To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing, if available, involves agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.

If we raise funds through additional collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our setmelanotide program on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market our setmelanotide program that we would otherwise prefer to develop and market ourselves.

Contractual obligations

~~We enter into agreements in the normal course~~As of business with CROs and CMOs for clinical trials and clinical supply manufacturing and with vendors for clinical research studies and other services and products for operating purposes. We do not classify these asMarch 31, 2021, there were no material changes to our principal contractual obligations ~~where~~and commitments as reported in our Annual Report on Form 10-K for the ~~contracts are cancelable at any time by us, generally upon 30 days' prior written notice~~fiscal year ended December 31, 2020.

Recent Accounting Pronouncements

For a discussion of pending and recently adopted accounting pronouncements, see Note 2 to ~~the vendor.~~our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Milestone and royalty payments associated with our license agreements with Ipsen and Camurus AB, or Camurus, have not been included as contractual obligations as we cannot reasonably estimate if or when they will occur. Under the terms of the Ipsen license agreement, assuming that setmelanotide is successfully developed, receives regulatory approval and is commercialized, Ipsen may receive aggregate payments of up to $40.0 million upon the achievement of certain development and commercial milestones under the license agreement and royalties on future product sales. The majority of the aggregate payments under the Ipsen license agreement are for milestones that may be achieved no earlier than first commercial sale of setmelanotide. In the event that we enter into a sublicense agreement, we will make payments to Ipsen, depending on the date of the sublicense agreement, ranging from 10% to 20% of all revenues actually received under the sublicense agreement. Under the terms of the Camurus license agreement, assuming that setmelanotide is successfully developed, receives regulatory approval and is commercialized, Camurus may receive aggregate payments of up to $64.75 million upon the achievement of certain development and commercial milestones under the license agreement and royalties on future product sales. The majority of the aggregate payments under the Camurus license agreement are for milestones that may be achieved no earlier than first commercial sale of setmelanotide.

In November 2015, we entered into a Lease Agreement for an office facility at 500 Boylston Street, Boston, Massachusetts. The lease term commenced in May 2016 and has a term of five years with a five-year renewal option to extend the lease.

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~~Future minimum payments under the operating lease agreements as of September 30, 2017, are as follows:~~

Operating Lease
2017

$
73
2018

298
2019

305
2020

311
2021

131
Total

1,118

~~Off‑balance~~Off-Balance Sheet Arrangements

We did not have during the ~~periods~~period presented, and we do not currently have, any ~~off‑balance~~off-balance sheet arrangements, as defined under applicable SEC rules.

Item 3. Quantitative and Qualitative Disclosures About Market ~~Risk.~~Risk

~~We are exposed to market risk in the ordinary course of our business. These risks primarily include interest rate sensitivities.~~ As of ~~September 30, 2017, we had cash, cash equivalents~~March 31, 2021, there were no material changes to our quantitative and ~~short-term investments of approximately $30.4 million, and after giving effect to the aggregate net proceeds from~~qualitative disclosures about market risks as reported in our IPO in October 2017, approximately $156.2 million. The proceeds from our IPO were invested in United States treasury money market funds. The interest-earning instruments carry a degree of interest rate risk; however, historical fluctuations in interest income have not been significant. We are not exposed to foreign currency exchange rates.

~~JOBS Act~~

In April 2012, the Jumpstart our Business Startups Act of 2012, or JOBS Act, was enacted. Section 107 of the JOBS Act provides that an “emerging growth company,” or EGC, can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended, or the Securities Act,Annual Report on Form 10-K for complying with new or revised accounting standards. Thus, an EGC can delay the adoption of certain newly implemented accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected not to avail ourselves of this extended transition period and, as a result, we will adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies.

We are in the process of evaluating the benefits of relying on other exemptions and reduced reporting requirements under the JOBS Act. Subject to certain conditions, as an EGC, we intend to rely on certain of these exemptions, including without limitation, (i) providing an auditor's attestation report on our system of internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes‑Oxley Act and (ii) complying with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor's report providing additional information about the audit and the financial statements, known as the auditor discussion and analysis. We will remain an EGC until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of this offering, (b) in which we have total annual gross revenue of at least $1.07 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common stock that is held by non‑affiliates exceeds $700 million as of the priorended December ~~31st, and (2) the date on which we have issued more than $1.0 billion in non‑convertible debt securities during the prior three‑year period.~~31, 2020.

Item 4. Controls and ~~Procedures.~~Procedures

Limitations on Effectiveness of Controls and Procedures

In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their cost.

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, are controls and other procedures designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified by the rules and forms promulgated by the SEC. Disclosure controls and

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~~procedures include, without limitation, controls and procedures designed to ensure that such information is accumulated and communicated to~~Our management, ~~including the chief executive officer and the chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.~~

~~In connection with the preparation of this Quarterly Report on Form 10-Q, we completed an evaluation, as of September 30, 2017, under the supervision of and~~ with the participation of our ~~management, including our Chief Executive Officer~~principal executive officer and ~~Chief Financial Officer, as to~~principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures (as ~~such term is~~ defined in Rules ~~13a-15(e)~~13a- 15(e) and ~~15d-15(e)~~15d- 15(e) under the Securities Exchange ~~Act).~~

~~It should be noted that any system~~Act of ~~controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives~~1934, as amended), as of the ~~system will be met. In addition,~~end of the ~~design of any control system is based in part upon certain assumptions about the likelihood of future events.~~period covered by this Quarterly Report on Form 10-Q. Based ~~upon the~~on such evaluation, our ~~Chief Executive Officer~~principal executive officer and ~~Chief Financial Officer~~principal financial officer have concluded that as of ~~September 30, 2017,~~March 31, 2021, our disclosure controls and procedures were effective at athe reasonable assurance level.

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Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and ~~15d‑15(f)~~15d-15(f) under the Exchange Act) that occurred during the ~~period~~most recent fiscal quarter covered by this ~~report~~Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal ~~Proceedings.~~Proceedings

We are not currently a party to any material legal proceedings.

Item 1A. Risk Factors

Our operations and financial results are subject to various risks and uncertainties, including those described below, which could adversely affect our business, financial condition, results of operations, cash flows, and the trading price of our common stock. Additional risks and uncertainties that we currently do not ~~presently known to us~~know about or that we currently ~~deem~~believe to be immaterial may also ~~may~~ impair our ~~business operations.~~business. You should carefully consider the risks described below and the other information in this Quarterly Report on Form 10-Q, including our unaudited condensed consolidated financial statements and the related notes thereto, and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Risks Related to Our Financial Position and Need for Capital

We are a ~~clinical‑stage~~commercial-stage biopharmaceutical company with a limited operating history and have not generated any revenue from product sales. We have incurred significant operating losses since our inception, anticipate that we will incur continued losses for the foreseeable future and may never achieve profitability.

We are a ~~clinical‑stage~~commercial-stage biopharmaceutical company with a limited operating history on which to base your investment decision. Biopharmaceutical product development is a highly speculative undertaking and involves a substantial degree of risk. We were incorporated in February ~~2013 in connection with the Corporate Reorganization.~~2013. Our operations to date have been limited primarily to acquiring rights to intellectual property, business planning, raising capital, developing our technology, identifying potential product candidates, undertaking preclinical studies and conducting research and development activities, including clinical trials, for setmelanotide. WeTo date, we have ~~never~~not generated ~~any~~significant revenue from product sales. We have obtained FDA approval for IMCIVREE™ (setmelanotide) for chronic weight management in adult and pediatric patients 6 years of age and older with obesity due to proopiomelanocortin, or POMC, proprotein convertase subtilisin/kexin type 1, or PCSK1, or leptin receptor, or LEPR, deficiency confirmed by genetic testing, but we have not obtained any other regulatory approvals for setmelanotide. We first commercialized IMCIVREE in the U.S. in the first quarter of 2021 and therefore do not have a long history operating as a commercial company. We will need to begin transitioning from a company with a research and development focus to a company capable of supporting commercial activities and we may not be successful in such a transition. We have not yet demonstrated our ability to manufacture at commercial scale, or arrange for a third party to do so on our behalf, or conduct sales, marketing and distribution activities necessary for successful product commercialization. Consequently, any predictions made about our future success or viability may not be as accurate as they could be if we had a longer operating history.

Since our inception, we have focused substantially all of our efforts and financial resources on the research and development of setmelanotide, which is FDA approved as noted above and currently in ~~Phase 3~~ clinical development for ~~two indications, POMC deficiency obesity~~Bardet-Biedl syndrome, or BBS, Alström syndrome, and ~~LepR deficiency obesity, and in various phases of development for~~ other indications. We have funded our

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operations to date primarily through the proceeds from the sales of common stock and preferred stock, asset sales, as well as capital contributions from ~~the Predecessor Company, the Relamorelin Company and the~~our former parent, Rhythm Holdings LLC, ~~entity and proceeds from sales of preferred stock~~ and have incurred losses in each year since our inception.

Our net ~~loss and comprehensive losses~~income (losses) were ~~$10.0 million, $23.2 million, $6.4~~$43.8 million and ~~$17.5~~($34.2) million for the three months ended March 31, 2021 and ~~the nine months ended September 30, 2017 and 2016,~~2020, respectively. As of ~~September 30, 2017,~~March 31, 2021, we had an accumulated deficit of ~~$99.7~~$415.6 million. Substantially all of our operating losses have resulted from costs incurred in connection with our development ~~program~~programs and from commercial

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and general and administrative costs associated with our operations. Our prior losses, combined with expected future losses, have had and will continue to have an adverse effect on our stockholders’ deficit and working capital. We expect our research and development expenses to significantly increase in connection with our additional clinical trials of setmelanotide and development of any other product candidates we may choose to pursue. In addition, ~~if we obtain~~having obtained marketing approval for ~~setmelanotide,~~IMCIVREE, we will incur significant sales, marketing and outsourced manufacturing expenses. We ~~also~~ will incur additional costs associated with operating as a public ~~company.~~company, including as a result of no longer qualifying as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. As a result, we expect to continue to incur significant and increasing operating losses for the foreseeable future. Because of the numerous risks and uncertainties associated with developing pharmaceutical products, we are unable to predict the extent of any future losses or when we will become profitable, if at all. Even if we do become profitable, we may not be able to sustain or increase our profitability on a quarterly or annual basis.

Our ability to become profitable depends upon our ability to generate revenue. To date, we have not generated any ~~revenue from setmelanotide, and we do not know when, or if, we will generate any revenue. We do not expect to generate~~ significant revenue ~~unless and until we obtain marketing approval for, and begin to sell,~~from setmelanotide. Our ability to generate revenue depends on a number of factors, including, but not limited to, our ability to:

●

commercialize setmelanotide by building a commercial organization and/or entering into collaborations with third parties; and

●

ensure setmelanotide is available to patients;

●

achieve market acceptance of setmelanotide in the medical community and with third-party payors.

●

continue to initiate and successfully complete ~~later‑stage~~later-stage clinical trials that meet their clinical endpoints;

●

continue to initiate and successfully complete all safety studies required to obtain U.S. and foreign marketing ~~approval~~approvals for setmelanotide as a treatment for obesity caused by genetic deficiencies affecting the ~~MC4~~MC4R pathway;

and

●

successfully manufacture or contract with others to manufacture ~~setmelanotide;~~

setmelanotide.

~~commercialize setmelanotide, if approved, by building an internal sales force or entering into collaborations with third parties; and~~

~~achieve market acceptance of setmelanotide in the medical community and with third‑party payors.~~

Absent our entering into collaboration or partnership agreements, we expect to incur significant sales and marketing costs as we prepare to commercialize setmelanotide. Even though IMCIVREE is FDA approved for chronic weight management in patients 6 years of age and older with obesity due to POMC, PCSK1 or LEPR deficiencies, and even if we ~~initiate and~~ successfully complete our pivotal and other clinical trials and setmelanotide is approved for commercial sale ~~and we incur the costs associated with these activities,~~in additional indications, setmelanotide may not be a commercially successful drug. We may not achieve profitability soon after generating product sales, if ever. If we are unable to generate product revenue, we will not become profitable and will be unable to continue operations without continued funding.

We will need to raise additional funding, which may not be available on acceptable terms, or at all. Failure to obtain this necessary capital when needed may force us to delay, limit or terminate our product development efforts or other operations.

We are currently in the early stages of commercializing IMCIVREE for chronic weight management in patients with obesity due to POMC, PCSK1 or LEPR deficiencies in the U.S. and advancing setmelanotide through clinical ~~development.~~development for additional indications in the United States and for potential approvals in other countries. Developing peptide therapeutic products is expensive and we expect our research and development expenses to increase substantially in connection with our ongoing activities, particularly as we advance setmelanotide in additional clinical trials. We intend to use ~~the proceeds from~~ our ~~IPO primarily for~~available cash resources to advance the clinical development of setmelanotide, for disease-education and ~~regulatory approval of setmelanotide.~~community-building activities, precommercialization activities for setmelanotide in BBS, patient identification, and commercialization activities related to IMCIVREE. Depending on the status of additional regulatory ~~approval~~approvals and ~~if approved,~~ commercialization of setmelanotide, as well as the progress we make in ~~the sale~~any sales of ~~setmelanotide,~~IMCIVREE, we may still require significant additional capital to fund the continued development of setmelanotide and our operating needs thereafter. We

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may also need to raise additional funds if we choose to pursue additional indications and/or geographies for setmelanotide or otherwise expand more rapidly than we presently anticipate.

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~~Through~~From August 2015 ~~we received capital contributions from the Predecessor Company, the Relamorelin Company and the LLC entity. In August 2015, December 2015, January 2017 and~~through August 2017, we raised aggregate ~~gross~~net proceeds of ~~$25.0~~$80.8 million ~~$15.0 million, $20.5 million and $20.5 million, respectively,~~ through our issuance of series A preferred stock. In connection with our initial public offering, or IPO, in October 2017 and our underwritten follow-on offerings through February 2021, we raised aggregate net proceeds of approximately $611.4 million through the issuance of our common stock after deducting underwriting discounts, commissions and offering related transaction costs. Since inception, we have received a further $100.0 million from asset sales, specifically in connection with the sale of our Rare Pediatric Disease Priority Review Voucher, or PRV, to Alexion Pharmaceuticals, Inc. As of ~~September 30, 2017,~~March 31, 2021, our cash and cash equivalents and ~~short‑term~~short-term investments were approximately ~~$30.4 million and after giving effect to the aggregate net proceeds from our IPO in October 2017, $156.2~~$404.8 million. We expect ~~that the net proceeds from~~ our ~~IPO, together with our existing~~ cash and cash equivalents and short-term investments will ~~be sufficient~~enable us to fund our operating expenses into at least the ~~first~~second half of ~~2019.~~2023. However, our operating plan may change as a result of many factors currently unknown to us, and we may need to seek additional funds sooner than planned, through public or private equity or debt financings, government or other ~~third‑party~~third-party funding, marketing and distribution arrangements and other collaborations, strategic alliances and licensing arrangements, or a combination of these approaches. We will also require additional capital to obtain additional regulatory ~~approval~~approvals for, and to continue to commercialize, setmelanotide. Raising funds in the current economic environment, particularly in light of ongoing uncertainty related to the COVID-19 pandemic, may present additional challenges. Even if we believe we have sufficient funds for our current or future operating plans, we may seek additional capital if market conditions are favorable or if we have specific strategic considerations.

Any additional fundraising efforts may divert our management from their ~~day‑to‑day~~day-to-day activities, which may adversely affect our ability to develop and commercialize setmelanotide. In addition, we cannot guarantee that future financing will be available in sufficient amounts or on terms acceptable to us, if at all. Moreover, the terms of any financing may adversely affect the holdings or the rights of our stockholders and the issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the market price of our shares to decline. The sale of additional equity or convertible securities would dilute all of our stockholders. The incurrence of indebtedness would result in increased fixed payment obligations and we may be required to agree to certain restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell or license intellectual property rights, and other operating restrictions that could adversely impact our ability to conduct our business. We could also be required to seek funds through arrangements with collaborative partners or other third parties at an earlier stage than otherwise would be desirable and we may be required to relinquish rights to setmelanotide or technologies or otherwise agree to terms unfavorable to us, any of which may have a material adverse effect on our business, operating results and prospects.

If we are unable to obtain funding on a timely basis, we may be required to significantly curtail, delay or discontinue one or more of our research or development programs or the commercialization of setmelanotide or be unable to expand our operations or otherwise capitalize on our business opportunities, as desired, which could materially adversely affect our business, financial condition and results of operations.

~~Our very limited operating history may make it difficult for you to evaluate the success of our business to date and to assess our future viability.~~

We are an early‑stage company. The Predecessor Company commenced active operations in February 2010, and we were incorporated as a separate company in February 2013. Our operations to date have been limited primarily to acquiring rights to intellectual property, business planning, raising capital, developing our technology, identifying potential product candidates, undertaking preclinical studies and, beginning in November 2010, conducting clinical trials. We have not yet demonstrated our ability to successfully complete a pivotal Phase 3 clinical trial, obtain marketing approvals, manufacture at commercial scale, or arrange for a third party to do so on our behalf or conduct sales, marketing and distribution activities necessary for successful product commercialization. Consequently, any predictions made about our future success or viability may not be as accurate as they could be if we had a longer operating history.

In addition, as a new business, we may encounter unforeseen expenses, difficulties, complications, delays and other known and unknown factors. We will need to transition at some point from a company with a research and development focus to a company capable of supporting commercial activities and we may not be successful in such a transition.

We expect our financial condition and operating results to continue to fluctuate significantly from quarter‑to‑quarter and year‑to‑year due to a variety of factors, many of which are beyond our control. Accordingly, you should not rely upon the results of any quarterly or annual periods as indications of future operating performance.

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~~Our historical financial information is not necessarily representative of the results we would have achieved as an independent company, and may not be a reliable indicator of our future results.~~

The historical financial information we have included in this Quarterly Report on Form 10-Q may not reflect what our results of operations, financial position and cash flows would have been had we been an independent company during the periods presented. This is primarily because:

our historical financial information reflects allocations for services historically provided to us by the Predecessor Company and the Relamorelin Company, which allocations may not reflect the costs we now and in the future will incur for similar services as an independent company; and

our historical financial information does not reflect changes that we have incurred and expect to continue to incur as a result of operating as an independent company and from reduced economies of scale, including changes in cost structure, personnel needs, financing and operations of our business.

Risks Related to the Development of Setmelanotide

The European Medicines Agency, or EMA, may disagree with our interpretation of clinical results obtained from our Phase 3 clinical trials for obesity due to POMC, PCSK1 or LEPR deficiencies, our results do not guarantee that the Marketing Authorization Application, or MAA, will support regulatory approval, and, even if our Phase 3 data are deemed to be positive by the EMA, the EMA may disagree with other aspects of the MAA submission and, as a result, the European Commission may decline to approve setmelanotide for the proposed indications.

Even though the FDA has approved IMCIVREE for chronic weight management in patients with obesity due to POMC, PCSK1 or LEPR deficiencies, the EMA could determine that the data from our Phase 3 clinical trials were negative or inconclusive, not sufficiently meaningful from a clinical perspective or could reach different conclusions than we and the FDA have on the same data. Negative or inconclusive results of a clinical trial or a difference of opinion could cause the European Commission to decline to approve our application or cause the EMA to require us to repeat the trial or conduct additional clinical trials prior to obtaining approval for commercialization, and there is no guarantee that additional trials would achieve positive results to the satisfaction of the EMA or that the EMA will agree with our interpretation of the results. Any such determination by the EMA would delay the timing of our commercialization plan for setmelanotide

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in Europe or prevent its further development, and adversely affect our business operations. Additionally, the EMA may provide commentary at any time during the review process which could require us to submit additional information and delay the review timeline, adversely affect the review process, or even prevent the approval of setmelanotide, any of which would adversely affect our business. We may not be able to appropriately remedy issues that the EMA may raise in its review of our MAA submission, and we may not have sufficient time or financial resources to conduct future activities to remediate issues raised by the EMA.

There is no guarantee that the data obtained from our Phase 3 clinical trials for obesity due to POMC, PCSK1 or LEPR deficiencies will be supportive of, or guarantee, a successful MAA submission, or result in our obtaining the European Commission’s approval of setmelanotide in a timely fashion and for a commercially viable indication, or at all.

Moreover, even if we obtain approval of setmelanotide in Europe, any such approval might significantly limit the approved indications for use, including by limiting the approved label for use by more limited patient populations than we propose, require that precautions, contraindications or warnings be included on the product labeling, including black box warnings, require expensive and time-consuming post-approval clinical studies, risk evaluation and mitigation strategies, or REMS, or surveillance as conditions of approval, or, through the product label, the approval may limit the claims that we may make, which may impede the successful commercialization of setmelanotide.

Positive results from early clinical trials of setmelanotide may not be predictive of the results of later clinical trials of setmelanotide. If we cannot generate positive results in our later clinical trials of setmelanotide, we may be unable to successfully develop, obtain regulatory approval for, and commercialize additional indications for setmelanotide.

Positive results from any of our Phase 1, ~~and~~ Phase 2, or Phase 3 clinical trials of setmelanotide, or initial results from other clinical trials of setmelanotide, may not be predictive of the results of later clinical trials. The duration of effect of setmelanotide tested in our Phase 1 and Phase 2 clinical trials was often for shorter periods than ~~that planned for testing~~ in our ~~current~~ pivotal Phase 3 clinical trials. The duration of effect of setmelanotide has only been studied in ~~long‑term~~long-term durations for a small number of patients in our Phase 2 and Phase 3 clinical trials and safety or efficacy issues may arise when more patients are studied in longer ~~trials.~~trials and on commercial drug. It is possible that the effects seen in ~~short‑term~~short-term clinical trials will not be replicated in ~~long‑term~~long-term or larger clinical trials. In addition, not all of our trials demonstrated statistically significant weight loss and there can be no guarantee that future trials will do so.

Positive results for one indication are not necessarily predictive of positive results for other indications. We have demonstrated statistically significant and clinically meaningful reductions in weight and hunger in Phase 3 clinical trials in obesity due to POMC, PCSK1 or LEPR deficiencies and BBS, and believe we have demonstrated proof of concept in Phase 2 clinical trials in deficiencies due to a variant in one of the two alleles in the POMC, ~~deficiency obesity, LepR deficiency obesity,~~PCSK1, or LEPR genes (HET obesity), as well as the SRC1 and ~~Bardet‑Biedl syndrome, three~~SH2B1 genes, all genetic ~~disorders~~diseases of extreme and unrelenting appetite and ~~obesity, in which setmelanotide dramatically reduced both weight and hunger.~~obesity. We hypothesize that patients with other upstream genetic defects in the ~~MC4~~MC4R pathway may also respond with reductions in weight and hunger after treatment with ~~setmelanotide, however~~setmelanotide. However patients with other upstream genetic defects may not have a similar response to setmelanotide, and until we obtain more clinical data in other genetic defects, we will not be sure that we can achieve proof of concept in such indications.

We are actively working to advance additional genetic deficiencies related to the MC4R pathway through our clinical development program. We anticipate initiating a Phase 3, registration-enabling study to evaluate setmelanotide in patients with MC4R pathway deficiencies due to a variant in one of the two alleles in the POMC, PCSK1, or LEPR genes (HET obesity), as well as the SRC1 and SH2B1 genes. In addition, ~~while~~ we ~~believe that proof~~plan to initiate an expanded Phase 2 Basket Study to evaluate setmelanotide for the treatment of ~~concept in Bardet‑Biedl syndrome has been demonstrated by improvements in hunger and weight reduction, supporting that this is~~obesity due to a ~~setmelanotide‑responsive, MC4 pathway disorder, the results of this trial are still at a preliminary stage.~~

We have or will have multiple clinical trials of setmelanotide ongoing, which are designed to include multiple genetically and clinically defined populations under one investigational protocol, although each population is enrolled and analyzed separately. A “basket” trial design could potentially decrease the time to study new populations by decreasing administrative burden, however, these trials do not overcome limitations to extrapolating data from the experiencedeficiency in one ~~disease to other diseases, because safety and efficacy results in each indication are analyzed separately. Accordingly, clinical~~of 31 additional genes associated with the MC4R pathway. However, success in a basket trial, or any trial in one indication, may not predict success in another indication. In contrast, in the event of an adverse safety issue, clinical hold, or other adverse finding in one or more indications being tested, such event could adversely affect our trials in the other indications and may delay or prevent completion of the clinical trials.

Many companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in later stage clinical trials after achieving positive results in early stage development, and we cannot be certain that we will not face similar setbacks. These setbacks have been caused by, among other things, pre-clinical findings made while clinical trials were underway. ~~We have completed the key toxicology studies that we believe the U.S. Food and Drug Administration, or the FDA, and the European Medicines Agency, or EMA, will require for approval, which include,~~

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among others, chronic toxicity studies, reproductive and developmental toxicity studies, and juvenile toxicology studies. Based on the totality of animal testing results to date, including the lack of any observed genotoxicity or tissue proliferative activity of setmelanotide in chronic toxicity studies, we have requested that the FDA permit us to defer carcinogenicity studies until after approval of a new drug application, or NDA, for setmelanotide. Accordingly, we believe that we will be able to defer all carcinogenicity studies until after we receive regulatory approval to market setmelanotide. However, the FDA has indicated that it will not make a decision on our request until after reviewing our final toxicology study reports. Accordingly, at this time, there can be no guarantee that we will be able to achieve this deferral which could impact the timing of any potential NDA approval as well as the time frame to achieve commercialization.

In addition to the foregoing issue, the FDA has requested that in our chronic rat and monkey studies we assess certain cells in brain, renal and liver tissues for the presence of vacuoles, which are common membrane‑bound compartments. The recommendation was based on the FDA’s review of a summary of a rat study that noted the presence of macrophage aggregates, which are groupings of specific white blood cells, in the choroid plexus, a network of blood vessels and epithelial tissue in the membrane lining outside the brain and spinal cord. The FDA noted that the existence of macrophage aggregates appears to be related to the polyethylene glycol vehicle in the product, rather than setmelanotide itself. We do not believe that the appearance of these aggregates raises any safety concerns, in part because of the localization of these aggregates. However, the FDA has not indicated that they agree with our position, and, accordingly, we are performing additional assessments for the presence of vacuoles, including assessments by an independent pathologist. Despite these additional assessments, the FDA may still not agree with our interpretation, and may require us to reflect these findings in the toxicological portion of the product labeling.

Additionally, setbacks may be caused by new safety or efficacy observations made in clinical trials, including previously unreported adverse ~~events.~~events, or AEs. Moreover, preclinical and clinical data are often susceptible to varying interpretations and analyses, and many companies that believed their product candidates performed satisfactorily in preclinical studies and clinical trials nonetheless failed to obtain FDA approval or a marketing authorization from the European ~~Commission authorization.~~Commission. If we fail to continue to obtain positive results in our Phase 3 clinical trials of setmelanotide, the development timeline and regulatory approval and commercialization prospects for setmelanotideand, correspondingly, our business and financial prospects, would be materially adversely affected.

Interim, “topline” and preliminary data from our clinical trials that we announce or publish from time to time may change as more patient data become available and are subject to audit and verification procedures that could result in material changes in the final data.

From time to time, we may publicly disclose preliminary or topline data from our preclinical studies and clinical trials, which is based on a preliminary analysis of then-available data, and the results and related findings and conclusions are subject to change following a more comprehensive review of the data related to the particular study or trial. For example, the results of our Phase 3 clinical trials for BBS and Alström syndrome that we have publicly disclosed consist of topline data and further analyses of data obtained from these trials. We make assumptions, estimations, calculations and conclusions as part of our analyses of data, and we may not have received or had the opportunity to fully and carefully evaluate all data. As a result, the topline or preliminary results that we report may differ from future results of the same studies, or different conclusions or considerations may qualify such results, once additional data have been received and fully evaluated. Topline data also remain subject to audit and verification procedures that may result in the final data being materially different from the preliminary data we previously published or reported. As a result, topline data should be viewed with caution until the final data are available.

From time to time, we may also disclose interim data from our preclinical studies and clinical trials. For example, we recently announced interim proof-of-concept data from our ongoing exploratory Phase 2 Basket Study evaluating setmelanotide in patients with MC4R pathway deficiencies due to a variant in one of the two alleles in the POMC, PCSK1, or LEPR genes, as well as the SRC1 and SH2B1 genes. Interim data from clinical trials that we may complete are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and more patient data become available. Adverse differences between preliminary or interim data and final data could significantly harm our business prospects. Further, disclosure of interim data by us or by our competitors could result in volatility in the price of our common stock.

Further, others, including regulatory agencies, may not accept or agree with our assumptions, estimates, calculations, conclusions or analyses or may interpret or weigh the importance of data differently, which could impact the value of the particular program, the approvability or commercialization of the particular product candidate or product and our company in general. In addition, the information we choose to publicly disclose regarding a particular study or clinical trial is based on what is typically extensive information, and you or others may not agree with what we determine is material or otherwise appropriate information to include in our disclosure.

If the interim, topline, or preliminary data that we report differ from actual results, or if others, including regulatory authorities, disagree with the conclusions reached, our ability to obtain approval for, and commercialize, our product candidates may be harmed, which could harm our business, operating results, prospects or financial condition.

The number of patients suffering from each of the ~~MC4~~MC4R pathway deficiencies we are targeting is small and has not been established with precision. If the actual number of patients is smaller than we estimate, our revenue and ability to achieve profitability may be materially adversely affected.

Due to the rarity of our target indications, there is no comprehensive patient registry or other method of establishing with precision the actual number of patients with ~~MC4~~MC4R pathway deficiencies. As a result, we have had to rely on other available sources to derive clinical prevalence estimates for our target indications. In addition, we have internal genetic sequencing results from approximately 37,500 patients, as of September 30, 2020, with severe obesity that provide another approach to estimating prevalence. Since the published epidemiology studies for these genetic deficiencies are based on relatively small population samples, and are not amenable to robust statistical analyses, it is possible that

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these projections may significantly exceed the addressable population, particularly given the need to genotype patients to definitively confirm a diagnosis.

WeBased on multiple epidemiological methods, we have estimated the potential addressable patient populations with these ~~MC4~~MC4R pathway deficiencies based on the following sources and assumptions:

●

POMC Deficiency ~~Obesity.~~ ~~There~~Obesity. POMC Deficiency Obesity is defined by the presence of biallelic variants in the POMC or PCSK1 genes that are interpreted as pathogenic, likely pathogenic, or of uncertain significance (VOUS). Our addressable patient population estimate for POMC deficiency obesity is approximately 100 to 500 patients in the United States, with a comparable addressable patient population in Europe. Our estimates are based on:

●

approximately 50 patients with POMC deficiency obesity noted in a series of published case reports, each mostly reporting a single or small number of patients. However, we believe our addressable patient population for this deficiency may be approximately 100 to 500 patients in the United States, and a comparable addressable patient population in Europe, as most of the reported cases are from a small number of academic research centers, and because genetic testing for POMC deficiency obesity is often unavailable and currently is rarely ~~performed. Based~~performed;

●

our belief, based on discussions with experts in rare diseases, ~~we also believe~~that the number of diagnosed cases could increase ~~several‑fold~~several-fold with increased awareness of this deficiency and the availability of new ~~treatments.~~

treatments;

●

~~LepR Deficiency Obesity and POMC Heterozygous Deficiency Obesity.~~ ~~Our addressable patient population estimate for LepR deficiency obesity is approximately 500 to 2,000 patients in the United States, and for~~

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~~POMC heterozygous deficiency obesity is approximately 4,000 patients in the United States, with a comparable addressable patient population for both indications in Europe. Our estimates are based on:~~

epidemiology studies on LepR deficiency and POMC heterozygous deficiency in small cohorts of patients comprised of children with severe obesity and adults with severe obesity who have a history of early onset obesity;

U.S. Census Bureau figures for adults and children, and Centers for Disease Control and Prevention, or CDC, prevalence numbers for severe adult obese patients (body mass index, or BMI, greater than 40 kg/m2) and for severe early onset obese children (99th percentile at ages two to 17 years old); and

●

our internal sequencing yield for POMC deficiency obesity patients (including both POMC and PCSK1 gene diseases), defined as patients having biallelic variants in the POMC or PCSK1 genes that are interpreted as pathogenic, likely pathogenic, or of uncertain significance (VOUS), of approximately 0.05%.

●

LEPR Deficiency Obesity. LEPR Deficiency Obesity is defined by the presence of biallelic variants in the LEPR gene that are interpreted as pathogenic, likely pathogenic, or of uncertain significance (VOUS). Our addressable patient population estimate for LEPR deficiency obesity is approximately 500 to 2,000 patients in the United States, with a comparable addressable patient population in Europe. Our estimates are based on:

●

epidemiology studies on LEPR deficiency obesity in small cohorts of patients comprised of children with severe obesity and adults with severe obesity who have a history of early onset obesity;

●

U.S. Census Bureau figures for adults and children and CDC prevalence numbers for severe adult obese patients (BMI, greater than 40 kg/m2) and for severe early onset obese children (99th percentile at ages two to 17 years old);

●

with wider availability of genetic testing expected for ~~LepR~~LEPR deficiency ~~and POMC heterozygous deficiency~~obesity and increased awareness of new treatments, our belief that up to 40% of patients with these ~~disorders~~diseases may eventually be ~~diagnosed.~~

diagnosed; and

●

our internal sequencing yield for LEPR deficiency obesity patients, defined as patients having biallelic variants in the LEPR gene that are interpreted as pathogenic, likely pathogenic, or of uncertain significance (VOUS), of approximately 0.09%.

~~Using these sources and assumptions, we calculated our estimates for addressable populations by multiplying (x) our estimate~~32

Table of the number of patients comprised of children with severe obesity and our estimate of a projected number of adults with severe obesity who have a history of early onset obesity, (y) the estimated prevalence from epidemiology studies of approximately 1% for LepR deficiency and 2% for POMC heterozygous, and (z) our estimated diagnosis rate of up to 40%.Contents

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~~Bardet‑Biedl Syndrome.~~Bardet-Biedl Syndrome. Our addressable patient population estimate for ~~Bardet‑Biedl syndrome~~BBS is approximately 1,500 to 2,500 patients in the United States based on:

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~~Published~~published prevalence estimates of one in 100,000 in North America, which projects to approximately 3,250 people in the United States. We believe the majority of these patients are addressable patients; and

●

~~We believe~~our belief that with wider availability of genetic testing expected for ~~Bardet‑Biedl syndrome~~BBS and increased awareness of new treatments, the number of patients diagnosed with this disorder will increase.

●

Alström ~~Syndrome.~~ Syndrome. Our addressable patient population estimate for Alström syndrome is approximately 500 ~~to 1,000~~ patients worldwide. This estimate is based on:

●

~~Published~~published prevalence estimates of one in 1,000,000 in North America, which projects to approximately 325 people in the United States. We believe the majority of these patients are addressable patients; and

●

~~We believe~~our belief that with wider availability of genetic testing expected for Alström syndrome and increased awareness of new treatments, the number of patients diagnosed with this disorder will increase.

●

POMC, PCSK1, or LEPR Heterozygous Deficiency Obesities; SRC1 and SH2B1 Deficiency Obesities. Our potential setmelanotide-responsive patient population estimate for POMC, PCSK1,or LEPR heterozygous, SRC1 and SH2B1 deficiency obesity patients with at least one variantinterpreted as pathogenic, likely pathogenic, or of uncertain significance (VOUS) is 100,000 to 200,000patients in the United States. Our estimates are based on:

●

U.S. Census Bureau population data and CDC prevalence numbers for early onset obesity (120% the 95th percentile between the ages of 2-5 years);

●

our internal sequencing yield of patients with POMC, PCSK1, or LEPR heterozygous, SRC1 or SH2B1 variants interpreted as pathogenic, likely pathogenic, or of uncertain significance (VOUS) of approximately 10-15%; and

●

a clinical response rate of 40% for patients carrying pathogenic or likely pathogenic variants, and 20% for patients carrying a variant of uncertain significance (VOUS).

The clinical response rate used in this calculation is based on the clinical data currently available to us from our trials and may change as more data become available.

●

MC4R Deficiency Obesity. Our addressable patient population estimate for MC4R-rescuable deficiency obesity is approximately 10,000 patients in the United States. This estimate is based on:

●

U.S. Census Bureau population data and CDC prevalence numbers for early onset obesity (120% the 95th percentile between the ages of 2-5 years);

●

a comprehensive ongoing biochemical screening study indicating there may be a defined subset of individuals who carry MC4R variants that may be rescued by an MC4R agonist; and

●

our internal sequencing yield for MC4R deficiency obesity patients of approximately 2.0% prior to application of functional filters.

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●

~~POMC Epigenetic Disorders.~~ ~~There~~Smith-Magenis Syndrome. Our addressable patient population estimate for Smith-Magenis syndrome is ~~currently no epidemiology data that defines~~approximately 2,400 patients in the ~~prevalence of POMC epigenetic disorders.~~

United States. This estimate is based on:

●

published prevalence estimates of one in 25,000 in the United States, which projects to approximately 13,000 people in the United States;

●

published prevalence estimates that approximately 10% of patients with Smith-Magenis syndrome have RAI1 variants that may affect the MC4R pathway and 90% of patients with Smith-Magenis syndrome have 17p11.2 chromosomal deletions which also may affect the MC4R pathway, of which approximately 67% and 13%, respectively, live with obesity; and

●

U.S. Census Bureau figures for total population of adults and children.

We believe that the patient populations in the ~~European Union~~EU are at least as large as those in the United States. However, we do not have comparable epidemiological data from the ~~European Union~~EU and these estimates are therefore based solely on applying relative population percentages to the ~~Company‑derived~~Company-derived estimates described above.

We are conducting additional clinical epidemiology studies to strengthen these prevalence projections. In parallel, we are also developing a patient registry for diagnosed patients with POMC deficiency and LepR deficiency which will further inform prevalence projections for these rareDefining the exact genetic ~~orders.~~

~~Another method to estimate the size of these ultra‑rare populations by genetic epidemiology~~variants that result in MC4R pathway diseases is using newly available large genomic databases, containing full genome sequencing or exome sequencing. Ultra‑rare orphan diseases are generally categorized as those that affect fewer than 20 patients per million. We have begun some substantial efforts

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with a series of such databases and/or collaborators. Much of our preliminary work has been with a database of approximately 140,000 genomes, which is representative of the U.S. population. These efforts generally are based on the prevalence of heterozygous mutations, as true null mutations are ultra‑rare, and then standard scientific methods such as the Hardy‑Weinberg equilibrium calculations, are applied to estimate the prevalence in the U.S. population. These methods make assumptions that may not be sufficiently robust for ultra‑rare genetic disorders, and have the inherent variability of estimates for rare events. In addition, the databases currently available only provide limited clinical data, such as, age, weight and BMI, that would be needed to associate genetic defects with severe obesity. However, until these data are confirmed in further genetic epidemiology efforts in additional databases, we must continue to base our patient population estimates on clinical epidemiological information.

~~In addition,~~complex, so if any approval that we obtain is based on a narrower definition of these patient populations than we had anticipated, then the potential market for setmelanotide for these indications will be smaller than we originally believed. In either case, a smaller patient population in our target indications would have a materially adverse effect on our ability to achieve commercialization and generate revenues.

If the actual number of patients suffering from each of the MC4 pathway deficiencies we are targeting is smaller than we estimate or if any approval that we obtain is based on a narrower definition of these patient populations, including pediatric populations, our ability to recruit patients to our trials may be materially adversely affected.

If the actual number of patients with any of the MC4 pathway deficiencies we are targeting is lower than we believe, it may be difficult to recruit patients, and this may affect the timelines for the completion of clinical trials. If we experience delays or difficulties in the enrollment and/or retention of patients in clinical trials, our regulatory submissions or receipt of ~~necessary regulatory~~additional marketing approvals could ~~also~~ be delayed or prevented.

~~The~~We may not be able to initiate or continue our planned clinical trials on a timely basis or at all for our product candidates if we are unable to recruit and enroll a sufficient number of eligible patients to participate in these trials through completion of such trials as required by the FDA or other comparable foreign regulatory authorities. Patient enrollment is a significant factor in the timing of clinical trials. Our ability to enroll eligible patients may be limited or may result in slower enrollment than we anticipate.

Our clinical trials will compete with other clinical trials that are in the same therapeutic areas as our product candidates, and this competition reduces the number and types of patients available to us, as some patients who might have opted to enroll in our trials may instead opt to enroll in a trial being conducted by one of our competitors. Because the number of qualified clinical investigators and clinical trial sites is limited, we expect to conduct some of our clinical trials at the same clinical trial sites that some of our competitors use, which will reduce the number of patients who are available for our clinical trials at such clinical trial sites. In addition, there are limited patient pools from which to draw for clinical studies. In addition to the rarity of genetic diseases of obesity, the eligibility criteria of our clinical studies will further limit the pool of available study participants as we will require that patients have specific characteristics that we can measure or to assure their disease is either severe enough or not too advanced to include them in a study. Patient enrollment for our current or any future clinical trials may be affected by other factors, including:

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size and nature of the patient population;

●

severity of the disease under investigation;

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availability and efficacy of approved drugs for the disease under investigation;

●

patient eligibility criteria for the trial in question as defined in the protocol;

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perceived risks and benefits of the product candidate under study;

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●

clinicians’ and patients’ perceptions as to the potential advantages of the product candidate being studied in relation to other available therapies, including any new products that may be approved or future product candidates being investigated for the indications we are investigating;

●

clinicians’ willingness to screen their patients for genetic markers to indicate which patients may be eligible for enrollment in our clinical trials;

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delays in or temporary suspension of the enrollment of patients in our planned clinical trial due to the COVID-19 pandemic;

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ability to obtain and maintain patient consents;

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patient referral practices of physicians;

●

the ability to monitor patients adequately during and after treatment;

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proximity and availability of clinical trial sites for prospective patients; and

●

the risk that patients enrolled in clinical trials will drop out of the trials before completion, including as a result of contracting COVID-19 or other health conditions or being forced to quarantine, or, because they may be late-stage cancer patients, will not survive the full terms of the clinical trials.

In addition, the pediatric population is an important patient population for setmelanotide, and our addressable patient population estimates include pediatric populations. However, it may be more challenging to conduct studies in ~~this population,~~younger subjects, and to locate and enroll pediatric patients. ~~Additionally,~~These factors may make it ~~may be challenging to ensure that pediatric or adolescent patients adhere to clinical trial protocols.~~

~~We currently are treating patients 12 years of age and older in our trials, but we aim to gain regulatory approval and labeling~~difficult for ~~patients six years of age and older. Accordingly, we have applied for permission from the FDA and other equivalent competent authorities in the EU member states~~us to enroll ~~these younger~~enough patients ~~aged six~~ to 11, in our pivotal trials. However, there may be issues that preclude this approval including, but not limited to, potential disagreement on dose titration or delivery methods and suitability of patient reported outcomes in younger patients, as well as avoiding over‑suppression of normal appetite in adolescents. In addition, the competent authorities in the EU member states may consider the polyethylene glycol vehicle in the product to carry additional risks in pediatric patients. We cannot guarantee that the FDA or other equivalent competent authorities in the EU member states will ultimately grant permission to enroll the younger pediatric patient population, nor can we predict whether they will require additional pre‑clinical studies or estimate the timing for approval, if any, of including patients under 12 in our trials or for the use of setmelanotide for such patients at all. The inability to obtain permission from the FDA or other equivalent competent authorities in the EU member states to enroll these younger patients under age 12 may narrow our potential patient population such that we may experience delays in enrolling sufficient numbers of patients in our clinical trials. Furthermore, if the FDA or other equivalent competent authorities in the EU member states do not approve the enrollment of the younger patient population in clinical trials or does not approve the use of setmelanotide in this population, the product candidate will not be labeled for promotion for these patients, even if they approve an NDA for setmelanotide for patients 12 and older.

While we have no knowledge of competitors developing product candidates intended to treat MC4 pathway deficiencies, competitors may emerge. If that were to occur and competitors initiated clinical trials for product candidates that treat the same indications as setmelanotide, patients who would otherwise be eligible forcomplete our clinical trials ~~may instead enroll~~ in ~~the clinical trials of our competitors’ product candidates.~~

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~~Patient enrollment is also affected by other factors including:~~

~~the severity of the disease under investigation;~~

~~the eligibility criteria for the clinical trial in question;~~

~~the perceived risks and benefits of the product candidate under study;~~

~~the success of efforts to facilitate timely enrollment in clinical trials;~~

~~the patient referral practices of physicians;~~

~~the ability to monitor patients adequately during and after treatment; and~~

~~the proximity and availability of clinical trial sites for prospective patients.~~

a timely and cost-effective manner. Our inability to enroll a sufficient number of patients for our clinical trials would result in significant delays ~~could~~or may require us to abandon one or more clinical trials ~~altogether and could delay or prevent our receipt of necessary regulatory approvals.~~altogether. Enrollment delays in our clinical trials may also result in increased development costs for setmelanotide ~~which would cause the value of our company to decline~~ and ~~limit~~any future product candidates and jeopardize our ability to obtain additional ~~financing.~~marketing approvals for the sale of setmelanotide. Furthermore, even if we are able to enroll a sufficient number of patients for our clinical trials, we may have difficulty maintaining participation in our clinical trials through the treatment and any follow-up periods.

Failures or delays in the commencement or completion of our planned clinical trials of setmelanotide could result in increased costs to us and could delay, prevent or limit our ability to generate revenue and continue our business.

We completed Phase 2 clinical trials for setmelanotide in 2016 for POMC deficiency obesity and are currently enrolling Phase 3 clinical trials for setmelanotide for POMC deficiency obesity in 2017. We completed Phase 2 clinical trials for setmelanotide for LepR deficiency obesity, and we expect to enroll the first patient in our LepR deficiency obesity Phase 3 clinical trial in the second half of 2017. We have also initiated Phase 2 clinical trials for Bardet‑Biedl syndrome, Alström syndrome, POMC heterozygous deficiency obesity, and POMC epigenetic disorders. Successful completion of ~~such~~our ongoing and planned clinical trials is a prerequisite to submitting an NDA or NDA supplement to the FDA, ~~a marketing authorization application~~an MAA to the EMA, and other applications for marketing authorization to equivalent competent authorities in foreign jurisdictions, and consequently, successful completion of such trials will be required for regulatory approvals and the ~~ultimate approval and~~ commercial marketing of setmelanotide.

We do not know whether our planned ~~additional Phase 2 or Phase 3~~ clinical trials will begin or whether any of our clinical trials will be completed on schedule, if at all, as the commencement and successful completion of clinical trials can be delayed or prevented for a number of reasons, including but not limited to:

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inability to generate sufficient preclinical or other in vivo or in vitro data to support the initiation of clinical studies;

●

delays in the completion of preclinical laboratory tests, animal studies and formulation studies in accordance with FDA’s good laboratory practice requirements and other applicable regulations;

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the FDA or other equivalent competent authorities in foreign jurisdictions may deny permission to proceed with our ongoing or planned ~~Phase 3 clinical~~ trials or any other clinical trials we may initiate, or may place a clinical trial on ~~hold;~~

hold or be suspended;

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●

delays in filing or receiving ~~approvals~~authorization to proceed under an additional investigational new drug application, or ~~additional~~ IND, ~~that may be~~if required;

●

~~negative results from our ongoing and planned preclinical studies, or~~delays in reaching a consensus with the FDA orand other ~~equivalent competent authorities in foreign jurisdictions requiring additional preclinical studies;~~

regulatory agencies on study design and obtaining regulatory authorization to commence clinical trials;

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~~delays in commencing additional necessary preclinical studies, including carcinogenicity and juvenile toxicology studies;~~

delays in reaching or failing to reach agreement on acceptable terms with prospective contract research organizations, or CROs, and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites;

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●

difficulties in obtaining Institutional Review Board, or IRB, and/or ethics committee approval to conduct a clinical trial at a prospective site or sites;

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since many already diagnosed patients are at academic sites, delays in conducting clinical trials at academic sites due to the particular challenges and delays typically associated with those ~~sites;~~

sites, as well as the lack of alternatives to these sites which have already-diagnosed patients;

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inadequate quantity or quality of setmelanotide or other materials necessary to conduct clinical trials, including delays in the manufacturing of sufficient supply of finished drug product;

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~~difficulties obtaining Institutional Review Board, or IRB, and/or ethics committee approval to conduct a~~challenges in identifying, recruiting and training suitable clinical ~~trial at a prospective site or sites;~~

investigators;

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challenges in recruiting and enrolling suitable patients to participate in clinical trials, including the size and nature of the patient population, the proximity of patients to clinical trial sites, eligibility criteria for the clinical trial, the nature of the clinical trial protocol, the availability of approved effective treatments for the relevant disease and competition from other clinical trial programs for similar indications;

trials;

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severe or unexpected ~~drug‑related~~drug-related side effects experienced by patients in a clinical trial, including side effects previously identified in our completed clinical trials;

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difficulty collaborating with patient groups and investigators;

~~delays~~●

failure by our CROs, other third parties or us to perform in ~~identifying and recruiting patients~~accordance with the FDA’s or any other regulatory authority’s good clinical practice requirements, or GCPs, or applicable regulatory guidelines in other countries;

●

occurrence of adverse events associated with setmelanotide that are viewed to outweigh its potential benefits, or occurrence of adverse events in trial of the ~~genetic causes~~same or similar class of ~~obesity in indications that we are targeting;~~

agents conducted by other companies;

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~~disagreement by~~changes to the ~~FDA, other regulatory agencies or the equivalent competent authorities in foreign jurisdictions with our~~ clinical trial ~~designs,~~protocols;

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clinical sites deviating from trial protocol or dropping out of a trial;

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changes in regulatory requirements and guidance that require amending or submitting new clinical protocols;

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changes in the standard of care on which a clinical development plan was based, which may require new or additional trials;

●

selection of clinical endpoints that require prolonged periods of observation or analyses of resulting data;

●

the cost of clinical trials of our product candidates being greater than we anticipate;

●

clinical trials of our product candidates producing negative or inconclusive results, which may result in ~~turn cause delays in initiating~~ our deciding, or regulators requiring us, to conduct additional clinical trials or ~~may lead to rejection~~abandon development of ~~our interpretation of data from clinical trials or to changes in the requirements for approval even after it has reviewed~~such product candidates; and ~~commented on the design for our clinical trials;~~

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the requirement to have a placebo controlled study even though the FDA and EMA did not impose one for POMC deficiency obesity, as we cannot be certain that this will be true for other indications or that the FDA or EMA, an advisory committee or the equivalent competent authorities in foreign jurisdictions will not change its guidance, as it has done so in the past for other open control trials;

●

~~uncertainty related~~development of antibodies to the ~~length of placebo‑controlled intervals~~drug or adjuvants may result in ~~clinical trials;~~

~~the need to perform non‑inferiority trials, which can be larger, longer and more costly, if treatment is approved for similar indications;~~

potential delays in the initiation of our clinical trials of LepR deficiency obesity due to the fact that we have not yet had discussions with the FDA regarding clinical trials for LepR deficiency obesity and, accordingly, do not know if the FDA will disagree with our clinical trial design;

POMC heterozygous deficiency may have additional challenges, including that the FDA the EMA, or the equivalent competent authorities in foreign jurisdictions may require that we show that setmelanotide works better in these patients than in the genetically normal population; other challenges associated with these patients may include additional delays in initiating clinical trials for this indication due to uncertainty about the subset of these patients who will respond effectively to setmelanotide and the lack of discussion for this indication with the FDA;

~~reports from preclinical or clinical testing of other weight~~ loss ~~therapies may raise safety or efficacy concerns; and~~

~~difficulties retaining patients who have enrolled in a clinical trial but may be prone to withdraw due to rigors of the clinical trial, lack~~ of efficacy ~~side‑effects, personal issues~~ or ~~loss of interest.~~

safety events.

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In addition, disruptions caused by the COVID-19 pandemic may increase the likelihood that we encounter such difficulties or delays in initiating, enrolling, conducting or completing our planned and ongoing clinical trials. Clinical trials may also be delayed or terminated as a result of ambiguous or negative interim results. In addition, a clinical trial may be suspended or terminated by us, the FDA or other equivalent competent authorities in foreign jurisdictions, the IRBs or ethics committees at the sites where the IRBs or the ethics committees are overseeing a clinical trial, a data and safety monitoring board, or DSMB, or Safety Monitoring Committee, or SMC, overseeing the clinical trial at issue or other equivalent competent authorities due to a number of factors, including, among others:

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failure to conduct the clinical trial in accordance with regulatory requirements or our clinical trial protocols;

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inspection of the clinical trial operations or trial sites by the FDA or other equivalent competent authorities that reveals deficiencies or violations that require us to undertake corrective action, including the imposition of a clinical hold;

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unforeseen safety issues, adverse side effects or lack of effectiveness;

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changes in government regulations or administrative actions;

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problems with clinical trial supply materials; and

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lack of adequate funding to continue the clinical trial.

~~Changes~~Delays in ~~regulatory requirements, FDA~~the completion of any preclinical studies or ~~EMA guidance or unanticipated events during our~~ clinical trials of setmelanotide ~~may occur, which may result~~will increase our costs, slow down our product candidate development and approval process and delay or potentially jeopardize our ability to commence product sales and generate product revenue. In addition, many of the factors that cause, or lead to, a delay in ~~changes to clinical trial protocols, changes to instruments for measuring subjective systems~~the commencement or ~~additional clinical trial requirements, which could result in increased costs to us and could delay our development timeline.~~

~~Changes in regulatory requirements, FDA guidance, guidance published by the EMA or the other competent authorities in foreign jurisdictions, or unanticipated events during our~~completion of clinical trials may ~~force us~~also ultimately lead to ~~amend~~the denial of a regulatory approval for setmelanotide. Any delays to our preclinical studies or clinical trials that occur as a result could shorten any period during which we may have the exclusive right to commercialize setmelanotide and our competitors may be able to bring products to market before we do, and the commercial viability of our product candidates could be significantly reduced. Any of these occurrences may harm our business, financial condition and prospects significantly.

The COVID-19 pandemic has and may continue to adversely impact our business, including our preclinical studies, clinical trials and our commercialization prospects.

The COVID-19 pandemic has spread to multiple countries, including the United States, Canada and Europe, where we have planned or ongoing preclinical studies and clinical trials. Governments from many countries have established stay at home measures including, among other things, the prohibition of public gatherings and restrictions on domestic and international travel. The pandemic and government measures taken in response have also had a significant impact, both direct and indirect, on businesses and commerce, as worker shortages have occurred, supply chains have been disrupted, facilities and production have been suspended, and demand for certain goods and services, such as medical services and supplies, has spiked, while demand for other goods and services, such as travel, has fallen. In response to the spread of COVID-19, we have limited access to our principal executive office with most employees continuing their work outside of our office and restricted travel. In addition, we experienced interruption of key clinical trial ~~protocols or the FDA, or the other competent authorities in foreign jurisdictions may impose additional~~activities, such as patient attendance and clinical trial ~~requirements. For instance, the FDA issued draft guidance on developing products for weight management~~site monitoring, in February 2007. In March 2012, the FDA’s Endocrinologic and Metabolic Drugs Advisory Committee met to discuss possible changes to how the FDA evaluates the cardiovascular safety of weight‑management drugs, and the FDA may require additional studies to support registration. In addition, the FDA is considering broader applicability of requirements for cardiovascular outcomes trials, or CVOTs, presenting the possibility of cardiovascular risk pre‑approval, including for obesity products. While our Phase 3 discussions with the FDA have not resulted in a requirement for any of these activities, any future requirement for these activities could result in additional clinical requirements for setmelanotide, increase our costs and delay approval of setmelanotide.

Amendments to our clinical trial protocols would require resubmission to the FDA and IRBs or other competent authorities and ethics committees in foreign jurisdictions for review and approval, which may adversely impact the cost, timing or successful completion of a clinical trial. If we experience delays completing, or if we terminate, any of our clinical trials, or if we are required to conduct additional clinical trials, the commercial prospects for setmelanotide may be harmed and our ability to generate product revenue will be delayed.

~~In addition, as part of commencing~~ our Phase 3 clinical trial evaluating setmelanotide for ~~setmelanotide~~the treatment of insatiable hunger and severe obesity in ~~POMC deficiency obesity,~~individuals with BBS or Alström syndrome. If the COVID-19 pandemic continues for a significant length of time, we ~~sought FDA concurrence~~may experience additional disruptions that could severely impact our business, preclinical studies, clinical trials and our commercialization prospects, including:

●

delays in receiving approval from local regulatory authorities to initiate or conduct our planned clinical trials;

●

further delays or difficulties in enrolling patients in our clinical trials;

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delays or difficulties in clinical site initiation, including difficulties in recruiting clinical site investigators and clinical site staff;

●

delays in clinical sites receiving the supplies and materials needed to conduct our clinical trials, including interruption in global shipping that may affect the transport of clinical trial materials;

●

changes in local regulations as part of a response to the COVID-19 pandemic which may require us to change the ways in which our clinical trials are conducted, which may result in unexpected costs, or to discontinue such clinical trials altogether;

●

diversion of healthcare resources away from the conduct of clinical trials, including the diversion of hospitals serving as our clinical trial sites and hospital staff supporting the conduct of our clinical trials;

●

further interruption of key clinical trial activities, such as clinical trial site monitoring, due to limitations on travel imposed or recommended by federal or state governments, employers and others, or interruption of clinical trial subject visits and study procedures, the occurrence of which could affect the integrity of clinical trial data;

●

risk that participants enrolled in our clinical trials will contract COVID-19 while the clinical trial is ongoing, which could impact the results of the clinical trial, including by increasing the number of observed adverse events;

●

interruptions or delays in preclinical studies due to restricted or limited operations at our research and development laboratory facility;

●

delays in necessary interactions with local regulators, ethics committees and other important agencies and contractors due to limitations in employee resources or forced furlough of government employees;

●

limitations in employee resources that would otherwise be focused on the conduct of our clinical trials, including because of sickness of employees or their families or the desire of employees to avoid contact with large groups of people;

●

refusal of the FDA to accept data from clinical trials in affected geographies;

●

impacts from prolonged remote work arrangements, such as increased cybersecurity risks and strains on our business continuity plans; and

●

delays in the receipt of marketing authorizations for our product candidates, which could materially affect our commercialization plans.

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The COVID-19 pandemic continues to rapidly evolve. The extent to which the pandemic impacts our business, preclinical studies, clinical trials and our commercialization prospects will depend on future developments, which are highly uncertain and cannot be predicted with ~~and received substantial input on,~~confidence, such as the use of Patient Reported Outcome, or PRO, and Observer Reported Outcome, or ORO questionnaires for measuring subjective endpoints for changes in hunger and/or food‑seeking behavior and compulsions. A PRO is a measurement based on a report that comes from the patient about the status of a patient’s health condition, without amendment or interpretationultimate geographic spread of the ~~patient’s response by a clinician or anyone else. An ORO is a measurement based on an observation by someone other than~~disease, the ~~patient or a health professional, such as a parent, spouse or other non‑clinical caregiver who is in a position to regularly observe and report on a specific aspect~~duration of the ~~patient’s health. In our Phase 3 clinical trial for setmelanotide, based on~~pandemic, travel restrictions and social distancing in the ~~FDA feedback, we plan~~United States and other countries, business closures or business disruptions, the effectiveness of vaccines and vaccine distribution efforts, and the effectiveness of other actions taken in the United States and other countries to ~~measure~~contain and treat the ~~ability~~disease. While the potential economic impact brought by and the duration of ~~setmelanotide to mitigate hunger and/or hyperphagia,~~ the ~~overriding physiological drive to eat, through PRO and ORO questionnaires. The questionnaires are designed to elicit feedback from patients on how well setmelanotide decreases~~

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~~their hunger, and from their family members or caregivers on the effect of setmelanotide on the patients’ food seeking behavior.~~

To our knowledge, no sponsor of an approved drug has yet used PRO or ORO questionnaires to generate data on hyperphagia or hunger mitigating endpoints. Because we may be relying on clinical endpoints that have not previously been the subject of prior FDA approvals, there is a risk that the FDA or other equivalent competent authorities in foreign jurisdictions may not consider the endpoints to provide evidence of clinically meaningful results or that resultsCOVID-19 pandemic may be difficult ~~for~~to assess or predict, the ~~FDA~~widespread pandemic has resulted in, and may continue to ~~interpret,~~result in, ~~particular for the pediatric age group. If we experience delays in~~significant disruption of global financial markets, reducing our ongoing validation of our PRO or ORO questionnaires, or do not receive agreement with those proposed questionnaires based on the conceptual framework, content reliability, other measures of validity, or their ability to detect changes in hyperphagia or hunger, we may experience delays in our trials or in product approval as well as be unable to reference data on hyperphagia or hunger in our product labeling. Finally, our Phase 3 clinical trials will be assessing hunger using multiple methods, some ofaccess capital, which were previously used in Phase 2, but some of which were initiated in Phase 3 trials and for which little data is available. Hence it is possible that the effects on hunger seen in Phase 2 trials may differ with some of the new methodologies for assessing hunger being used in Phase 3 trials, or may not support languagecould in the ~~proposed product labeling.~~future negatively affect our liquidity. In addition, the recession or economic downturn resulting from the spread of COVID-19 could materially affect our business.

Setmelanotide may cause undesirable side effects that could delay or prevent additional regulatory ~~approval,~~approvals, limit the commercial profile of an approved labeling, or result in significant negative consequences following marketing ~~approval, if any.~~approval.

First generation MC4R agonists were predominantly small molecules that failed in clinical trials due to significant safety issues, particularly increases in blood pressure, and had limited efficacy. Undesirable side effects caused by setmelanotide could cause us or regulatory authorities to interrupt, delay or halt clinical trials and could result in a more restrictive labeling or the delay or denial of additional regulatory ~~approval~~approvals by the FDA or other equivalent competent authorities in foreign jurisdictions. Treatment-related side effects could also affect patient recruitment or the ability of enrolled patients to complete the trial or result in potential product liability claims. Any of these occurrences may prevent us from achieving or maintaining market acceptance of the affected product candidate and may adversely affect our business, financial condition and prospects significantly.

Setmelanotide is an MC4R agonist. Potential side effects of MC4R agonism, which have been noted either with setmelanotide or with other MC4R agonists in clinical trials and preclinical studies, may include:

●

adverse effects on cardiovascular parameters, such as increases in heart rate and blood pressure;

●

erections in males and similar effects in women, such as sexual arousal, clitoral swelling and hypersensitivity;

●

nausea and vomiting;

●

reduced appetite;

●

headache;

●

effects on mood, depression, anxiety and other psychiatric manifestations; and

●

other effects, ~~specifically back pain, headaches, fatigue, diarrhea~~for which most investigators reported as unrelated to setmelanotide and ~~joint pain, that have been seen numerically more frequently in setmelanotide‑treated patients as compared with placebo patients.~~

for which no increased incidence or pattern is currently evident.

~~Injection~~In addition, injection site reactions have been seen in subcutaneous, or SC, injections with setmelanotide. In addition, setmelanotide has likely ~~off‑target~~off-target effects on the ~~closely‑related~~closely-related MC1 receptor, which mediates tanning in response to sun exposure. Other MC1 receptor mediated effects include darkening of skin blemishes, such as freckles and moles, and hair color ~~change in one subject.~~change. The cosmetic effects are not tolerated by all patients, as a small number of patients have withdrawn from treatment due to tanning. These effects have generally been reversible in clinical trials, but it is still unknown if they will be reversible with ~~long‑term~~long-term exposure. The MC1 receptor mediated effects may also carry risks. The ~~long‑term~~long-term impact of MC1 receptor activation has not been tested in clinical trials, and could potentially include increases in skin cancer, excess biopsy procedures and cosmetic blemishes. These skin changes may also result in unblinding, which could make interpretation of clinical trial results more complex and possibly subject to bias.

~~The safety data we~~ We have disclosed to date represents our interpretation of the data at the time of disclosure and they are subject to our further review and analysis. The only serious adverse event possibly attributed to setmelanotide in

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our clinical trials was one report of atypical chest pain seen in our Phase 2 clinical trial with once daily SC injection, although there was no evidence of any serious respiratory or cardiac cause on careful examination. Overall, there have been five other serious adverse events in the overall clinical development program in addition to the serious adverse event described above: two others during treatment on setmelanotide, left arm numbness and influenza immunization reaction and three during treatment with placebo, including biliary dyskinesia, severe groin strain and pelvic inflammatory disease. None of these serious adverse events was considered related to setmelanotide.

~~We are~~ also ~~initiating~~initiated trials of setmelanotide in potential new indications that include patients who might have more serious underlying conditions, such as Alström syndrome and ~~lipodystrophy.~~other indications. It is possible that the underlying conditions in these patients, such as

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congestive heart failure and ~~pancreatitis,~~potentially other conditions, may confound the understanding of the safety profile of setmelanotide.

~~In addition,~~If these or other significant adverse events or other side effects are observed in any of our ~~interpretation of the safety data from our~~ongoing or planned clinical trials, ~~is contingent upon~~we may have difficulty recruiting patients to the ~~review and ultimate approval~~clinical trials, patients may drop out of our trials, or we may be required to abandon the trials or our development efforts of that product candidate altogether. We, the FDA, other comparable regulatory authorities or an IRB may also suspend clinical trials of a product candidate at any time for various reasons, including a belief that subjects in such trials are being exposed to unacceptable health risks or adverse side effects. Some potential therapeutics developed in the biotechnology industry that initially showed therapeutic promise in early-stage trials have later been found to cause side effects that prevented their further development. Even if the side effects do not preclude setmelanotide from maintaining marketing approval or obtaining additional approvals, undesirable side effects may inhibit market acceptance due to its tolerability versus other ~~equivalent competent authorities in foreign jurisdictions. The FDA or other equivalent competent authorities in foreign jurisdictions may not agree with~~therapies. Any of these developments could materially adversely affect our ~~methods of analysis or our interpretation of the results. In addition, the long‑term effects of setmelanotide have only been tested in a limited number of patients.~~business, financial condition and prospects.

Further, if ~~setmelanotide receives marketing approval and~~ we or others identify undesirable side effects caused by the product, or any other similar product, before or after ~~the approval,~~regulatory approvals, a number of potentially significant negative consequences could result, including:

●

regulatory authorities may request that we withdraw the product from the market or may limit or vary their approval of the product through labeling or other means;

●

regulatory authorities may require the addition of labeling statements, such as a “boxed” warning or a contraindication;

●

the FDA, the European Commission and other equivalent competent authorities in foreign jurisdictions may require the addition of a Risk Evaluation and Mitigation Strategy, or REMS, or other specific obligations as a condition for marketing authorization due to the need to limit treatment to rare patient populations, or to address safety concerns;

●

we may be required to change the way the product is distributed or administered ~~conduct additional clinical trials~~ or change the labeling of the product;

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we may be required to conduct additional studies and clinical trials or comply with other post-market requirements to assess possible serious risks;

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we may be required to conduct long term safety follow-up evaluations, including setting up disease and drug based registries;

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we may decide to remove the product from the marketplace;

●

we could be sued and held liable for injury caused to individuals exposed to or taking the product; and

●

our reputation may suffer.

Any of these events could prevent us from achieving or maintaining market acceptance of setmelanotide and could substantially increase the costs of commercializing setmelanotide and significantly impact our ability to successfully commercialize setmelanotide and generate revenues.

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Although we have been granted orphan drug designation for setmelanotide in treating POMC deficiency obesity, LEPR deficiency obesity, Bardet-Biedl syndrome and Alström syndrome in both the United States and the EU, and Prader-Willi syndrome in the EU, we may be unable to obtain orphan drug designation for other uses or to obtain exclusivity in any use. Even with exclusivity, competitors may obtain approval for different drugs that treat the same indications as setmelanotide.

The FDA may designate drugs for relatively small patient populations as orphan drugs. Under the Orphan Drug Act of 1983, or the Orphan Drug Act, the FDA may designate a product candidate as an orphan drug if it is intended to treat a rare disease or condition, which is defined under the Federal Food, Drug and Cosmetic Act, or FDCA, as having a patient population of fewer than 200,000 individuals in the United States, or a patient population greater than 200,000 in

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the United States where there is no reasonable expectation that the cost of developing the drug will be recovered from sales in the United States.

Generally, if a product candidate with an orphan drug designation receives the first marketing approval for the indication for which it has such designation, the product is entitled to a period of seven years of marketing exclusivity, which precludes the FDA from approving another marketing application for a product that constitutes the same drug treating the same indication for that marketing exclusivity period, except in limited circumstances.

The exclusivity period in the United States can be extended by six months if the NDA sponsor submits pediatric data that fairly respond to a written request from the FDA for such data. ~~Even under these circumstances, we may not be granted pediatric approval from the FDA for these indications.~~ Orphan drug exclusivity may be revoked if the FDA determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantity of the product to meet the needs of patients with the rare disease or condition. Other potential benefits of orphan drug designation and/or approval of a designated drug include eligibility for: exemption from certain prescription drug user fees, tax credits for certain qualified clinical testing expenses, and waivers from the pediatric assessment requirements of the Pediatric Research Equity ~~Act,~~Act.

In the EU, orphan drug designation is granted by the European Commission based on a scientific opinion by the EMA’s Committee for Orphan Medicinal Products in relation to medicinal products that are intended for the diagnosis, prevention or ~~PREA.~~treatment of life-threatening or chronically debilitating conditions affecting not more than five in 10,000 persons in the EU and in relation to which no satisfactory method of diagnosis, prevention, or treatment has been authorized (or the product would be a significant benefit to those affected). Additionally, designation is granted for products intended for the diagnosis, prevention, or treatment of a life-threatening, seriously debilitating or serious and chronic condition and when, without incentives, it is unlikely that sales of the medicinal product in the EU would be sufficient to justify the necessary investment in developing the medicinal product.

~~Although we~~In addition to a range of other benefits during the development and regulatory review, orphan medicinal products are, upon grant of marketing authorization, entitled to ten years of exclusivity in all EU member states. Marketing authorization may, however, be granted to a similar medicinal product with the same orphan indication during the ten-year period with the consent of the marketing authorization holder for the original orphan medicinal product or if the manufacturer of the original orphan medicinal product is unable to supply sufficient quantities. Marketing authorization may also be granted to a similar medicinal product with the same orphan indication if the similar product is deemed safer, more effective or otherwise clinically superior to the original orphan medicinal product. The period of market exclusivity may, in addition, be reduced to six years if it can be demonstrated on the basis of available evidence that the original orphan medicinal product is sufficiently profitable not to justify maintenance of market exclusivity.

Grant of orphan designation by the European Commission also entitles the holder of this designation to financial incentives such as reduction of fees or fee waivers. Orphan drug designation must be requested before submitting an application for marketing authorization. Orphan drug designation does not, in itself, convey any advantage in, or shorten the duration of, the regulatory review and authorization process.

We have been granted orphan drug designation for setmelanotide in treating POMC deficiency obesity, ~~if we request~~LEPR deficiency obesity, BBSand Alström syndrome in both the United States and the EU. We have been granted orphan ~~drug~~ designation for setmelanotide ~~for other uses, there~~in treating Prader-Willi syndrome in the EU. There can be no assurance that the FDA or the European Commission will grant such ~~designation. For example, if~~designation for setmelanotide for other uses. In addition, orphan drug designation

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neither shortens the ~~population~~development time or regulatory review time of ~~patients who would be appropriate candidates for~~ a drug ~~is 200,000 or more individuals,~~nor gives the drug ~~may not qualify for orphan drug designation, even if~~any advantage in the ~~population for which the sponsor seeks approval is lower than 200,000. Additionally, the designation of setmelanotide as an orphan drug does not guarantee that the FDA will accelerate~~ regulatory review ~~of,~~ or ~~ultimately approve, setmelanotide.~~approval process.

Even if we obtain orphan drug exclusivity for setmelanotide, that exclusivity may not effectively protect setmelanotide from competition because different drugs can be approved for the same condition. In the United States, even after an orphan drug is approved, the FDA may subsequently approve another drug for the same condition if the FDA concludes that the latter drug is not the same drug or is clinically superior in that it is shown to be safer, more effective or makes a major contribution to patient care.

On August 3, 2017, Congress passed the FDA Reauthorization Act of 2017, or the FDARA. FDARA, among other things, codified the FDA’s pre‑existing regulatory interpretation, to require that a drug sponsor demonstrate the clinical superiority of an orphan drug that is otherwise the same as a previously approved drug for the same rare disease in order to receive orphan drug exclusivity. The new legislation reverses prior precedent holding that the Orphan Drug Act unambiguously requires that the FDA recognize the orphan exclusivity period regardless of a showing of clinical superiority. The FDA may further reevaluate the Orphan Drug Act and its regulations and policies. We do not know if, when, or how the FDA may change the orphan drug regulations and policies As discussed above, similar rules apply in the ~~future, and it is uncertain how any changes might affect our business. Depending on what changes the FDA may make to its orphan drug regulations and policies, our business could be adversely impacted.~~EU.

Although we have obtained ~~breakthrough therapy~~PRIME designation in the EU and Breakthrough Therapy designation for setmelanotide for the treatment of obesity associated with genetic defects upstream of the ~~MC4 receptor~~MC4R in the ~~leptin‑melanocortin~~leptin-melanocortin pathway, which includes ~~both~~ POMC deficiency obesity, ~~and LepR~~LEPR deficiency obesity, Bardet-Biedl syndrome and Alström syndrome in the United States, the FDA may rescind the ~~breakthrough designation~~Breakthrough Therapy Designation and we may be unable to obtain ~~breakthrough therapy~~Breakthrough Therapy designation for other uses. In addition, ~~breakthrough therapy~~Breakthrough Therapy designation by the FDA may not lead to a faster development, regulatory review or approval process, and it does not increase the likelihood that setmelanotide will receive additional marketing ~~approval~~approvals in the United ~~States.~~States or a marketing authorization in the EU.

~~Under the Food and Drug Administration Safety and Innovation Act, or FDASIA, the~~The FDA is authorized under the FDCA to give certain products ~~“breakthrough therapy~~“Breakthrough Therapy designation.” A Breakthrough ~~therapy~~Therapy product candidate is defined as a product candidate that is intended, alone or in combination with one or more other drugs, to treat a serious or ~~life‑threatening~~life-threatening disease or condition and preliminary clinical evidence indicates that such product candidate may demonstrate substantial improvement on one or more clinically significant endpoints over existing therapies. The FDA will seek to ensure the sponsor of ~~breakthrough therapy~~Breakthrough Therapy product candidate receives intensive guidance on an efficient drug development program, intensive involvement of senior managers and experienced staff on a proactive, collaborative and ~~cross‑disciplinary review~~

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~~and a rolling review process whereby~~cross-disciplinary review. In addition, the FDA may consider reviewing portions of an NDA before the sponsor submits the complete ~~application.~~application, or rolling review. Product candidates designated as breakthrough therapies by the FDA may be eligible for other expedited programs, such as priority review, if supported by clinical data.

Designation as ~~breakthrough therapy~~Breakthrough Therapy is within the discretion of the FDA. Accordingly, even if we believe setmelanotide meets the criteria for designation as ~~breakthrough therapy~~Breakthrough Therapy for other uses, the FDA may disagree. In any event, the receipt of ~~breakthrough therapy~~Breakthrough Therapy designation for a product candidate, or acceptance for one or more of the FDA’s other expedited programs, may not result in a faster development process, review or approval compared to products considered for approval under conventional FDA procedures and does not guarantee ultimate approval by the FDA. Regulatory standards to demonstrate safety and efficacy must still be met. Additionally, the FDA may later decide that the product candidate no longer meets the conditions for designation and may withdraw designation at any time or decide that the time period for FDA review or approval will not be shortened.

The PRIME program was launched by the EMA in 2016. PRIME is intended to enhance support for the development of medicines that target an unmet medical need. This voluntary scheme is based on enhanced interaction and early dialogue with developers of promising medicines, to optimize development plans and speed up evaluation so these medicines can reach patients earlier. In late June 2018, setmelanotide was designated as PRIME by the CHMP. Acknowledging that setmelanotide targets an unmet medical need, the EMA offers enhanced support in the development of the medicinal product through enhanced interaction and early dialogue to optimize our development plans and speed up regulatory evaluation in the EU. As part of this designation, the EMA has provided guidance to us concerning the development of setmelanotide. The PRIME designation does not, however, guarantee that the regulatory review process in the EU will be shorter or less demanding. Neither does the PRIME designation guarantee that the European Commission will grant a marketing authorization for setmelanotide.

We may not be able to translate the ~~current~~once-daily formulations of setmelanotide for methods of delivery that would be acceptable to the FDA or other equivalent competent authorities in foreign jurisdictions or commercially successful.

Setmelanotide is currently administered by once-daily SC injection using small ~~insulin‑type~~insulin-type needles. SC injection is generally less ~~well‑received~~well-received by patients than other methods of administration, such as oral administration. Considerable

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additional resources and efforts, including potential studies, may be necessary in order to translate the ~~current formulations~~once-daily formulation of setmelanotide into ~~forms~~a once-weekly formulation that ~~will~~may be ~~well‑received~~well-received by patients.

We have entered into a license agreement with Camurus AB, or Camurus, for the use of Camurus’ drug delivery technology, FluidCrystal, to formulate once-weekly setmelanotide. This formulation, if successfully developed for setmelanotide, and approved by the FDA and other regulatory authorities, will be delivered subcutaneously, similar to our ~~current~~once-daily formulation, except that we anticipate it will be injected once weekly.

While we have started consultations with regulatory authorities about the potential path for approval of the once-weekly formulation, we cannot yet estimate the requirements for non-clinical and clinical data, manufacturing program, time, cost, and probability of success for approval. Regulatory authorities have limited experience evaluating Camurus’ formulations, which further complicates our understanding regarding the information that may be required to obtain approval of a once-weekly formulation.

We received FDA approval of the once-daily formulation in the initial NDA submission for chronic weight management in patients with obesity due to POMC, PCSK1 or LEPR deficiencies, and plan to seek approval of the once-weekly formulation at a later time. While we plan to ~~utilize~~develop the ~~current~~once-weekly formulation, or to develop other new and useful formulations and delivery technology for setmelanotide, we cannot estimate the probability of success, nor the resources and time needed to succeed. If we are unable to gain approval and utilize ~~this~~the once-weekly formulation, or to develop new formulations, setmelanotide may not achieve significant market acceptance and our business, financial condition and results of operations may be materially harmed.

Our approach to treating patients with ~~MC4~~MC4R pathway deficiencies requires the identification of patients with unique genetic subtypes, for example, POMC genetic deficiency. The FDA or other equivalent competent authorities in foreign jurisdictions could require the clearance, approval or CE ~~mark~~marking of an in vitro companion diagnostic device to ensure appropriate selection of patients as a condition of approving ~~setmelanotide.~~setmelanotide in additional indications. The ~~development and~~requirement that we obtain clearance, approval or CE mark of an in vitro companion diagnostic device ~~would~~will require substantial financial resources, and could delay or prevent the receipt of additional regulatory ~~approval of setmelanotide.~~approvals for setmelanotide, or adversely affect those we have already obtained.

We ~~intend to focus~~have focused our development of setmelanotide as a treatment for obesity caused by certain genetic deficiencies affecting the ~~MC4~~MC4R pathway. ~~In order to assist~~ To date, we have employed in identifying this subset of patients, we employ a genetic diagnostic test, which is a test or measurement that evaluates the presence of genetic variants in a patient. The FDA has advised that for our clinical trial of setmelanotide to treat POMC deficiency obesity, it will be sufficient to use vitro genetic diagnostic testing known as Sanger bi‑directional nucleotide sequencing, as long as that testing is performed by laboratories meeting the standards of the Clinical Laboratory Improvement Amendments, or CLIA, for Laboratory Developed Tests, or LDTs. Currently the Centers for Medicare and Medicaid Services, or CMS, regulates LDTs and the laboratories that develop them, and enforces CLIA. CMS evaluates whether there is clinical utility for each specific test, and also performs postmarket oversight of laboratory operational processes. CMS coverage determinations of clinical utility measure the ability of the test to impact clinically meaningful health outcomes, such as mortality or morbidity, through the adoption of efficacious treatments. CMS’s oversight through the CLIA program is designed to confirm that a lab assesses analytical validity, but does not confirm whether it had results from an analytical validity assessment that were sufficient to support the claimed intended use of the test. The FDA has issued guidance indicating, however, that in the future it intends to assert jurisdiction over LDTs and to increase regulatory requirements for LDTs. If the FDA does so, the burdens and costs of using LDTs to select patients for setmelanotide could increase, the availability of those LDTs could be negatively affected, and our development program for setmelanotide could be delayed, which in turn could delay or impair our ability to proceed to commercialization.

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~~Although the FDA has advised us that an LDT is sufficient for identifying patients~~enrollment in our clinical trials, ~~the agency also indicated that approval of an~~ ~~in vitro~~ ~~companion diagnostic device may be necessary should~~including our clinical ~~results reveal that genetic testing is needed~~trials for the safe use of setmelanotide, such as to avoid significant toxicities in certain patients or because the drug might provide only marginal benefits except in a very clearly defined eligible population. ~~In vitro~~ ~~companion diagnostic devices provide information that is essential~~IMCIVREE and for other potential indications for setmelanotide. If the safe and effective use of any of our product candidates depends on an in vitro diagnostic that is not otherwise commercially available, then the FDA may require approval or clearance of that diagnostic, known as a ~~corresponding therapeutic product. These~~ companion diagnostic, ~~devices may be co‑developed~~at the same time as, or in connection with, ~~a device manufacturer or with a laboratory, and generally require~~the FDA approval ~~as well.~~of such product candidates.

~~Should~~If the FDA or ~~other equivalent competent authorities in foreign jurisdictions require the use~~a comparable regulatory authority requires clearance or approval of a companion diagnostic ~~device, we may face significant delays or obstacles in obtaining approval of an NDA, or of comparable foreign marketing authorization~~ for setmelanotide, as the FDA or other equivalent competent authorities in foreign jurisdictions may take the position that a companion diagnostic is required prior to granting approval of setmelanotide. In addition, we may be dependent on the sustained cooperation and effort of third‑party collaborators with whom we may partner in the future to develop ~~in vitro~~ companion diagnostic devices. We and our potential future collaborators may encounter difficulties in developing such tests, including issues relating to the selectivity and/or specificity of the diagnostic, analytical validation, reproducibility or clinical validation. Anyany delay or failure by us or our ~~potential~~current and future collaborators to develop or obtain regulatory clearance or approval of, or to CE mark, such tests, if necessary, could delay or prevent us from obtaining additional approvals for setmelanotide, or adversely affect the approvals we have already obtained. For example, in November 2020, the FDA approved IMCIVREE for chronic weight management in adult and pediatric patients 6 years of age and older with obesity due to POMC, PCSK1, or LEPR deficiencies confirmed by genetic testing demonstrating variants in POMC, PCSK1, or LEPR genes that are interpreted as pathogenic, likely pathogenic, or of uncertain significance. Although the FDA did not require that we obtain approval of ~~setmelanotide.~~

Ifa companion diagnostic prior to approving the ~~FDA deems setmelanotide~~New Drug Application, or NDA, for IMCIVREE, in connection with the NDA approval we agreed as a post-marketing commitment to ~~require~~conduct adequate analytical and clinical validation testing to develop and establish an in vitrocompanion diagnostic device to accurately ~~identify~~and reliably detect patients with variants in the ~~patients who belong~~POMC, PCSK1, and LEPR genes that may benefit from setmelanotide therapy. In September 2020, our collaboration partner, Prevention Genetics, submitted a de novo request seeking FDA authorization to ~~the target subset, the FDA will require product labeling that limits use to only those patients who express the genetic variants identified by the device. Moreover, even if setmelanotide and~~market such an in vitrocompanion diagnostic device ~~are approved together,~~for IMCIVREE as a Class II medical device. In December 2020, the FDA sent Prevention Genetics a major deficiency letter in response to the de novo request, which among other things, placed the review on hold and requested additional information needed to support the requested device ~~itself may~~classification. Although we believe that Prevention Genetics will be ~~subject~~able to ~~reimbursement limitations that could limit access to treatment and therefore adversely affect our business and financial results.~~

~~We have only one product candidate and we may not be successful~~resolve the issues identified in ~~any future efforts to identify and develop additional product candidates.~~

~~We have only one product candidate and may seek to identify and develop additional product candidates, both within and outside of our current area of expertise. If so,~~ the success of our business may depend primarily on our ability to identify, develop and commercialize these products. Research programs to identify new product candidates require substantial technical, financial and human resources. We may fail to identify other potential product candidates for clinical development for a number of reasons. Our research methodologymajor deficiency letter, they may be unsuccessful in identifying potential product candidates or our potential product candidates may be shown to have harmful side effects or may have other characteristics that may make the products unmarketable or unlikely to receive marketing approval. We may focus our effortsdoing so, and resources on potential programs or product candidates that ultimately prove to be unsuccessful. In addition, any such efforts could adversely impact our continued development and commercialization of setmelanotide.

If any of these events occur, we may be forced to abandon some or all of our development efforts for a program or programs, which would have a material adverse effect on our business and could potentially cause us to cease operations.

~~Prader‑Willi syndrome, or PWS, is a complex disease, and companies have had difficulties in developing new therapies for PWS.~~

Although we have been granted orphan drug designation for setmelanotide in treating PWS, we are not moving directly towards a Phase 3 trial in PWS at this time, but instead will be assessing how to proceed in another Phase 2 trial. We do not know the probability that we will be able to proceed to Phase 3 and/or approval, even when these efforts are completed. In addition, the experience by others suggests that PWS patients are high risk for adverse experiences and hence clinical trials in that population are extremely challenging. It may be both difficult to determine if adverse effects in this population are due to the disease, setmelanotide or some combination of both. PWS is a complex multigenic disease, and the hypothesis that PWS is an upstream MC4 pathway disorder is supported primarily on the role of only one of those genes, MAGEL2, in animal models of obesity. Our results may support that PWS is not an upstream MC4 pathway disorder. Alternatively, other design factors may have influenced the outcome of this trial, and we will be reassessing in 2018 the possibility of future Phase 2 trials in PWS that address the following potential factors: duration of treatment,

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younger age of population, improved setmelanotide pharmacokinetics, consideration of higher doses, and operational limitations of the completed Phase 2 trial. There can be no assurances that some of the factors that affected the results of the PWS trials will not also adversely impact the results of our trials for other indications.

~~Risks Related to the Commercialization of Setmelanotide~~

~~Even if approved, reimbursement policies could limit our ability to sell setmelanotide.~~

Market acceptance and sales of setmelanotide will depend on reimbursement policies and may be affected by healthcare reform measures. Government authorities and third‑party payors, such as private health insurers and health maintenance organizations, decide which medications they will pay for and establish reimbursement levels for those medications. Cost containment is a primary concern in the U.S. healthcare industry and in foreign jurisdictions. Government authorities and these third‑party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular medications. We cannot be sure that reimbursement will be available for setmelanotide and, if reimbursement is available, the level of such reimbursement. Reimbursement may impact the demand for, or the price of setmelanotide. If reimbursement is not available or is available only at limited levels, we may not be able to successfully commercialize setmelanotide.

In some foreign countries, particularly in Canada and in the EU member states, the pricing of prescription pharmaceuticals is subject to strict governmental control. In these countries, pricing negotiations with governmental authorities can take six to 12 months or longer after the receipt of regulatory approval and product launch. To obtain favorable reimbursement for the indications sought or pricing approval in some countries, wePrevention Genetics may be required to ~~conduct~~submit and obtain

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approval of a clinical trial that compares the cost‑effectiveness of setmelanotide with other available therapies. If reimbursement for setmelanotide is unavailable in any country in which we seek reimbursement, if it is limited in scope or amount, if it is conditioned upon our completion of additional clinical trials or if pricing is set at unsatisfactory levels, our operating results could be materially adversely affected.

In the European Union, in particular, each EU member state can restrict the range of medicinal products for which its national health insurance system provides reimbursement and can control the prices of medicinal products for human use marketed in its territory. As a result, following receipt of marketing authorization in an EU member state, through anyPMA application route, an applicant is required to engage in pricing discussions and negotiations with the competent pricing authority in the individual EU member states. Some EU member states operate positive and negative list systems under which products may only be marketed once a reimbursement price has been agreed upon. Other EU member states approve a specific price for the medicinal product or may instead adopt a system of direct or indirect controls on the profitability of the company placing the medicinal product on the market. The downward pressure on healthcare costs in ~~general, particularly prescription drugs, has become more intense. As a result, increasingly high barriers~~vitro companion diagnostic device before we are ~~being erected~~able to ~~the entry of new products. In addition, we may face competition for setmelanotide from lower priced products in foreign countries that have placed price controls on pharmaceutical products.~~

Health Technology Assessment, or HTA, of medicinal products, however, is becoming an increasingly common part of the pricing and reimbursement procedures in some EU member states, including the United Kingdom, France, Germany, Ireland, Italy and Sweden. HTA is the procedure accordingfulfill our post-marketing commitment to FDA, which the assessment of the public health impact, therapeutic impact and the economic and societal impact of use of a given medicinal product in the national healthcare systems of the individual country is conducted. HTA generally focuses on the clinical efficacy and effectiveness, safety, cost, and cost‑effectiveness of individual medicinal products as well as their potential implications for the healthcare system. Those elements of medicinal products are compared with other treatment options available on the market. The outcome of HTA regarding specific medicinal products will often influence the pricing and reimbursement status granted to these medicinal products by the competent authorities of individual EU member states. The extent to which pricing and reimbursement decisions are influenced by the HTA of the specific medicinal product varies between EU member states. In addition, pursuant to Directive 2011/24/EU on the application of patients’ rights in cross‑border healthcare, a voluntary network of national authorities or bodies responsible for HTA in the individual EU member states was established. The purpose of the network is to facilitate and support the exchange of scientific information concerning HTAs. This maywould lead to ~~harmonization of the criteria taken into account in the conduct of HTAs between EU member states~~further delay and ~~in pricing and reimbursement decisions and may negatively affect price in at least some EU member states.~~

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could entail significant additional expense. If we are unable to ~~establish sales and marketing capabilities or enter into agreements with third parties to market and sell setmelanotide,~~fulfill our postmarket commitments for IMCIVREE in a timely manner, the FDA could take enforcement action against us, which could adversely affect our prospects. Further, if ~~approved, we may not be able to generate any revenue.~~

~~We do not currently have infrastructure in place for the sale, marketing or distribution of pharmaceutical products. In order to market setmelanotide, if approved by~~ the FDA or ~~other equivalent competent authorities in foreign jurisdictions,~~a comparable regulatory authority requires clearance or approval of a companion diagnostic when we must build our sales, marketing, managerial and other non‑technical capabilities or make arrangements with third parties to perform these services. If we are unable to establish adequate sales, marketing and distribution capabilities, whether independently or with third parties, or if we are unable to do so on commercially reasonable terms, our business, results of operations, financial condition and prospects would be materially adversely affected.

~~Even if we receive marketing approval~~seek additional approvals for setmelanotide, ~~in the United States, we may never receive regulatory approval to market setmelanotide outside of the United States.~~

We intend to pursue marketing approval for setmelanotide in the European Union and in other countries worldwide. In order to market any product outside of the United States, we must establish and comply with the numerous and varying safety, efficacy and other regulatory requirements of other countries. Approval procedures vary among countries and can involve additional setmelanotide testing and additional administrative review periods. The time required to obtain approvals in other countries might differ from that required to obtain FDA approval. The marketing approval processes in other countries may implicate all of the risks detailed above regarding FDA approval in the United States as well as other risks. In particular, in many countries outside of the United States, products must receive pricing and reimbursement approval before the product can be commercialized. Obtaining this approval can result in substantial delays in bringing products to market in such countries. Marketing approval in one country does not ensure marketing approval in another, but a failure or delay in obtaining marketing approval in one country may have a negative effect on the regulatory process or commercial activities in others. Failure to obtain marketing approval in other countries or any delay or other setback in obtaining such approval would impair our ability to market setmelanotide in such foreign markets. Any such impairment would reduce the size of our potential market share and could have a material adverse impact on our business, results of operations and prospects.

~~Even if we receive marketing approval for setmelanotide, we may not achieve market acceptance, which would limit the revenue that we generate from the sale of setmelanotide.~~

~~The commercial success of setmelanotide, if approved~~failure by ~~the FDA~~us or other equivalent competent authorities in foreign jurisdictions, will also depend upon the awareness and acceptance of setmelanotide within the medical community, including physicians, patients and third‑party payors. If setmelanotide is approved but does not achieve an adequate level of acceptance by patients, physicians and third‑party payors, we may not generate sufficient revenue to become or remain profitable. Before granting reimbursement approval, third‑party payors may require us to demonstrate that, in addition to treating obesity caused by certain genetic deficiencies affecting the MC4 pathway, setmelanotide also provides incremental health benefits to patients. Our efforts to educate the medical community and third‑party payors about the benefits of setmelanotide may require significant resources and may never be successful. All of these challenges may impact our ability to ever successfully market and sell setmelanotide.

~~Market acceptance of setmelanotide, if approved, will depend on a number of factors, including, among others:~~

the ability of setmelanotide to treat obesity caused by certain genetic deficiencies affecting the MC4 pathway and, if required by any competent authority in connection with the approval for these indications, to provide patients with incremental health benefits, as compared with other available treatments, therapies, devices or surgeries;

~~the relative convenience and ease of SC injections as the necessary method of administration of setmelanotide, including as compared with other treatments for obese patients;~~

~~the prevalence and severity of any adverse side effects associated with setmelanotide;~~

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limitations or warnings contained in the labeling approved, as well as the existence of a REMS, for setmelanotide by the FDA or the specific obligations imposed as a condition for marketing authorization imposed by other equivalent competent authorities in foreign jurisdictions, particularly by the European Commission;

~~availability of alternative treatments, including a number of obesity therapies already approved or expected to be commercially launched in the near future;~~

~~the size of the target patient population, and the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies;~~

the ability of setmelanotide to treat the maximum range of pediatric patients, and any limitations on its indications for use, such as if the labeling limits the approved population to patients ages 12 and above;

~~the strength of marketing and distribution support and timing of market introduction of competitive products;~~

~~publicity concerning setmelanotide or competing products and treatments;~~

~~pricing and cost effectiveness;~~

~~the effectiveness of our sales and marketing strategies;~~

~~our ability to increase awareness of setmelanotide through marketing efforts;~~

~~our ability to obtain sufficient third‑party coverage or reimbursement;~~

~~the willingness of patients to pay out‑of‑pocket in the absence of third‑party coverage; and~~

the likelihood that the FDA or other equivalent competent authorities in foreign jurisdictions may require development of a REMS as a condition of approval or post‑approval, may not agree with our proposed REMS or may impose additional requirements that limit the promotion, advertising, distribution or sales of setmelanotide.

Our industry is intensely competitive. If we are not able to compete effectively against current and future competitors, we may not be able to generate revenue from the sale of setmelanotide, our business will not grow and our financial condition and operations will suffer.

The biotechnology and pharmaceutical industries are intensely competitive and subject to rapid and significant technological change. We have competitors in a number of jurisdictions, many of which have substantially greater name recognition, commercial infrastructures and financial, technical and personnel resources than we have. Established competitors may invest heavily to quickly discover and develop compounds that could make setmelanotide obsolete or uneconomical. Any new product that competes with an approved product may need to demonstrate compelling advantages in efficacy, convenience, tolerability and safety to be commercially successful. Other competitive factors, including generic competition, could force us to lower prices or could result in reduced sales. In addition, new products developed by others could emerge as competitors to setmelanotide. If we are not able to compete effectively against our current and future ~~competitors, our business will not grow and our financial condition and operations will suffer.~~

~~Currently, there are no approved~~collaborators to develop or ~~effective current treatments for regulating hunger and hyperphagia related behaviors~~obtain regulatory clearance or approval of, ~~patients with POMC deficiency obesity, LepR deficiency obesity, Bardet‑Biedl syndrome, Alström syndrome, POMC heterozygous deficiency obesity,~~ or ~~POMC epigenetic disorders. Bariatric surgery is not a treatment option for these genetic disorders of obesity because the severe obesity and hyperphagia associated with these disorders are considered~~ to ~~be risk factors for bariatric surgery. While we are unaware of any competitive products in development~~

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~~for the obesity and hyperphagia caused by MC4 pathway deficiencies specifically, new competitors may emerge which~~CE mark, such tests, if necessary, could ~~limit our business opportunity in the future.~~

~~We face potential product liability exposure, and, if claims are brought against~~delay or prevent us ~~we may incur substantial liability.~~

The use of setmelanotide in clinical trials and the sale of setmelanotide, if approved, exposes us to the risk of product liability claims. Product liability claims might be brought against us by patients, healthcare providers or others selling or otherwise coming into contact with setmelanotide. For example, we may be sued if any product we develop allegedly causes injury or is found to be otherwise unsuitable during product testing, manufacturing, marketing or sale. Anyfrom obtaining such product liability claims may include allegations of defects in manufacturing, defects in design or a failure to warn of dangers inherent in the product, including as a result of interactions with alcohol or other drugs, negligence, strict liability and a breach of warranties. Claims could also be asserted under state consumer protection laws. If we become subject to product liability claims and cannot successfully defend ourselves against them, we could incur substantial liabilities. In addition, regardless of merit or eventual outcome, product liability claims may result in, among other things:

~~withdrawal of patients from our clinical trials;~~

~~substantial monetary awards to patients or other claimants;~~

~~decreased demand for setmelanotide or any future product candidates following marketing approval, if obtained;~~

~~damage to our reputation and exposure to adverse publicity;~~

~~litigation costs;~~

~~distraction of management’s attention from our primary business;~~

~~loss of revenue; and~~

~~the inability to successfully commercialize setmelanotide or any future product candidates, if approved.~~

We maintain product liability insurance coverage for our clinical trials with a $10.0 million annual aggregate coverage limit. Our insurance coverage may be insufficient to reimburse us for any expenses or losses we may suffer. Moreover, in the future, we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses, including if insurance coverage becomes increasingly expensive. If and when we obtain marketing approvaladditional approvals for setmelanotide, or adversely affect the approvals we intend to expand our insurance coverage to include the sale of commercial products. However, we may not be able to obtain this product liability insurance on commercially reasonable terms. Large judgments have been awarded in class action lawsuits based on drugs that had unanticipated side effects. The cost of any product liability litigation or other proceedings, even if resolved in our favor, could be substantial, particularly in light of the size of our business and financial resources. A product liability claim or series of claims brought against us could cause our stock price to decline and, if we are unsuccessful in defending such a claim or claims and the resulting judgments exceed our insurance coverage, our financial condition, business and prospects could be materially adversely affected.already obtained.

~~Risks Related to Our Dependence on Third Parties~~

We rely, and expect that we will continue to rely, on third parties to conduct clinical trials for setmelanotide. If these third parties do not successfully carry out their contractual duties or meet expected deadlines, we may not be able to obtain additional regulatory ~~approval~~approvals for or commercialize setmelanotide and our business could be substantially harmed.

We ~~enter into~~have agreements with ~~third‑party~~third-party CROs to provide monitors for and to manage data for our ongoing clinical trials. We rely heavily on these parties for the execution of clinical trials for setmelanotide and control only certain aspects of their activities. As a result, we have less direct control over the conduct, timing and completion of these clinical

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trials and the management of data developed through the clinical trials than would be the case if we were relying entirely upon our own staff. Communicating with outside parties can also be challenging, potentially leading to mistakes as well as difficulties in coordinating activities. However, we remain responsible for the conduct of these trials and are subject to enforcement which may include civil and criminal liabilities for any violations of FDA rules and regulations and the comparable foreign regulatory provisions during the conduct of our clinical trials. Outside parties may:

●

have staffing difficulties;

●

fail to comply with contractual obligations;

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devote inadequate resources to our clinical trials;

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experience regulatory compliance issues;

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undergo changes in priorities or become financially distressed; or

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form more favorable relationships with other entities, some of which may be our competitors.

These factors may materially adversely affect the willingness or ability of third parties to conduct our clinical trials and may subject us to unexpected cost increases that are beyond our control. Nevertheless, we are responsible for ensuring that each of our studies is conducted in accordance with the applicable protocol, legal, regulatory and scientific standards, and our reliance on CROs does not relieve us of our regulatory responsibilities. We and our CROs are required to comply with current ~~Good Clinical Practices, or cGCPs,~~GCPs, which are guidelines enforced by the FDA, the ~~Competent Authorities~~competent authorities of the EU member states and equivalent competent authorities in foreign jurisdictions for any products in clinical development. The FDA enforces these regulations and cGCP guidelines through periodic inspections of clinical trial sponsors, principal investigators, and trial ~~sites.~~sites, and IRBs. If we or our CROs fail to comply with applicable cGCPs, the clinical data generated in our clinical trials may be deemed unreliable and the FDA or other equivalent competent authorities in foreign jurisdictions may require us to perform additional clinical trials before approving our marketing applications. We cannot assure you that, upon inspection, the FDA will determine that any of our clinical trials comply with cGCPs. In addition, our clinical trials must be conducted with products produced under current Good Manufacturing Practices, or cGMPs. Our failure or the failure of our CROs to comply with these regulations may require us to repeat clinical trials, which would delay the regulatory approval process and could also subject us to enforcement action up to and including civil and criminal penalties.

If any of our relationships with these ~~third‑party~~third-party CROs terminate, we may not be able to enter into arrangements with alternative CROs. If CROs do not successfully carry out their contractual duties or obligations or meet expected

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deadlines, if they need to be replaced or if the quality or accuracy of the clinical data they obtain are compromised due to the failure to adhere to our clinical protocols, regulatory requirements or for other reasons, any such clinical trials may be extended, delayed or terminated, and we may not be able to obtain regulatory approval for, or successfully commercialize, setmelanotide. As a result, our financial results and the commercial prospects for setmelanotide in the subject indication would be harmed, our costs could increase and our ability to generate revenue could be delayed.

Risks Related to the Commercialization of IMCIVREE (setmelanotide)

The successful commercialization of IMCIVREE and any other product candidates will depend in part on the extent to which governmental authorities, private health insurers, and other third-party payors provide coverage and adequate reimbursement levels. Failure to obtain or maintain coverage and adequate reimbursement for setmelanotide or our other product candidates, if any and if approved, could limit our ability to market those products and decrease our ability to generate revenue.

Our ability to commercialize IMCIVREE or any product candidates successfully will depend in part on the extent to which coverage and reimbursement for these product candidates and related treatments will be available from government authorities, private health insurers and other organizations. Government authorities and third-party payors, such as private health insurers and health maintenance organizations, decide which medications they will pay for and establish reimbursement levels.

Increasing efforts by governmental and third-party payors in the United States and abroad to cap or reduce healthcare costs may cause such organizations to limit both coverage and the level of reimbursement for newly approved products and, as a result, they may not cover or provide adequate payment. Even if we show improved efficacy or improved convenience of administration with our product candidates, third-party payors may deny or revoke the reimbursement status of our product candidates, if approved, or establish prices for our product candidates at levels that are too low to enable us to realize an appropriate return on our investment. If reimbursement is not available or is available only at limited levels, we may not be able to successfully commercialize setmelanotide or other product candidates, and may not be able to obtain a satisfactory financial return. Further, as we continue to grow as an organization, previously-established prices may no longer be sufficient and could create additional pricing pressure for us.

No uniform policy for coverage and reimbursement for products exist among third-party payors in the United States. Therefore, coverage and reimbursement for products can differ significantly from payor to payor. As a result, the coverage determination process is often a time-consuming and costly process that may require us to provide scientific and clinical support for the use of setmelanotide to each payor separately, with no assurance that coverage and adequate reimbursement will be applied consistently or obtained in the first instance. Furthermore, rules and regulations regarding reimbursement change frequently, in some cases on short notice, and we believe that changes in these rules and regulations are likely.

In some foreign countries, particularly in Canada and in the EU member states, the pricing and reimbursement of prescription only medicinal products is subject to strict governmental control which varies widely between countries. In these countries, pricing negotiations with governmental authorities can take six to twelve months or longer after the receipt of regulatory approval and product launch. To obtain favorable reimbursement for the indications sought or pricing approval in some countries, we may be required to conduct a clinical trial that compares the cost-effectiveness of setmelanotide with other available therapies. If reimbursement for setmelanotide is unavailable in any country in which we seek reimbursement, if it is limited in scope or amount, if it is conditioned upon our completion of additional clinical trials or if pricing is set at unsatisfactory levels, our operating results could be materially adversely affected.

In the EU, in particular, each EU member state can restrict the range of medicinal products for which its national health insurance system provides reimbursement and can control the prices of medicinal products for human use marketed in its territory. As a result, following receipt of marketing authorization in an EU member state, through any application route, an applicant is required to engage in pricing discussions and negotiations with the competent pricing authority in the individual EU member states. Some EU member states operate positive and negative list systems under which products may only be marketed once a reimbursement price has been agreed upon. Other EU member states approve a specific price for the medicinal product or may instead adopt a system of direct or indirect controls on the profitability of the company

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placing the medicinal product on the market. The downward pressure on healthcare costs in general, particularly prescription drugs, has become more intense. As a result, increasingly high barriers are being erected to the entry of new products. In addition, we may face competition for setmelanotide from lower priced products in foreign countries that have placed price controls on pharmaceutical products.

Health Technology Assessment, or HTA, of medicinal products, however, is becoming an increasingly common part of the pricing and reimbursement procedures in England and some EU member states, including France, Germany, Italy, Spain, the Netherlands, Belgium, Norway and Sweden. HTA is the procedure according to which the assessment of the public health impact, therapeutic impact and the economic and societal impact of use of a given medicinal product in the national healthcare systems of the individual country is conducted. HTA generally focuses on the clinical efficacy and effectiveness, safety, cost, and cost-effectiveness of individual medicinal products as well as their potential implications for the healthcare system. Those elements of medicinal products are compared with other treatment options available on the market. The outcome of HTA regarding specific medicinal products will often influence the pricing and reimbursement status granted to these medicinal products by the competent authorities of individual EU member states. The extent to which pricing and reimbursement decisions are influenced by the HTA of the specific medicinal product varies between EU member states. In addition, pursuant to Directive 2011/24/EU on the application of patients’ rights in cross-border healthcare, a voluntary network of national authorities or bodies responsible for HTA in the individual EU member states was established. The purpose of the network is to facilitate and support the exchange of scientific information concerning HTAs. This may lead to harmonization of the criteria taken into account in the conduct of HTAs between EU member states and in pricing and reimbursement decisions and may negatively affect price in at least some EU member states.

As a further step in this direction, on January 31, 2018, the European Commission adopted a proposal for a regulation on HTA. This legislative proposal is intended to boost cooperation among EU member states in assessing health technologies, including new medicinal products, and providing the basis for cooperation at the EU level for joint clinical assessments in these areas. The proposal would permit EU member states to use common HTA tools, methodologies, and procedures across the EU, working together in four main areas, including joint clinical assessment of the innovative health technologies with the most potential impact for patients, joint scientific consultations whereby developers can seek advice from HTA authorities, identification of emerging health technologies to identify promising technologies early, and continuing voluntary cooperation in other areas. Individual EU member states will continue to be responsible for assessing non-clinical (e.g., economic, social, ethical) aspects of health technology, and making decisions on pricing and reimbursement. The European Commission has stated that the role of the draft HTA regulation is not to influence pricing and reimbursement decisions in the individual EU member states. However, this consequence cannot be excluded. The related legislative process is currently ongoing with EU member states divided on the proposal.

If we are unable to establish sales and marketing capabilities or enter into agreements with third parties to market and sell IMCIVREE, we may not be able to generate any revenue.

In order to market IMCIVREE, we must continue to build our sales, marketing, managerial and other non-technical capabilities or make arrangements with third parties to perform these services. Although we have received FDA approval for IMCIVREE, for chronic weight management in adult and pediatric patients 6 years of age and older with obesity due to POMC, PCSK1 or LEPR deficiency, we are early in our commercialization efforts and have not yet established a full-scale commercial infrastructure. Therefore, you should not compare us to commercial-stage biotechnology companies, and you should not expect that we will generate substantial revenues or become profitable in the near term. If we are unable to establish adequate sales, marketing and distribution capabilities, whether independently or with third parties, or if we are unable to do so on commercially reasonable terms, our business, results of operations, financial condition and prospects would be materially adversely affected.

We may never receive regulatory approval to market setmelanotide outside of the United States.

We are seeking marketing authorization for setmelanotide in the EU and intend to seek marketing authorizations in other countries worldwide. In order to market any product outside of the United States, we must establish and comply with the numerous and varying safety, efficacy and other regulatory requirements of other countries. Marketing authorization procedures vary among countries and can involve additional setmelanotide testing and additional administrative review periods. The time required to obtain marketing authorization in other countries might differ from

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that required to obtain FDA approval. The marketing authorization processes in other countries may implicate all of the risks detailed above regarding FDA approval in the United States as well as other risks. In particular, in many countries outside of the United States, products must receive pricing and reimbursement approval before the product can be commercialized. Obtaining this approval can result in substantial delays in bringing products to market in such countries. Grant of marketing authorization in one country does not ensure grant of marketing authorization in another country, but a failure or delay in obtaining marketing authorization in one country may have a negative effect on the regulatory process or commercial activities in others. Failure to obtain marketing authorization in other countries or any delay or other setback in obtaining such authorizations would impair our ability to market setmelanotide in such foreign markets. Any such impairment would reduce the size of our potential market share and could have a material adverse impact on our business, results of operations and prospects.

We may not achieve market acceptance for IMCIVREE, which would limit the revenue that we generate from the sale of setmelanotide.

The commercial success of IMCIVREE will also depend upon the awareness and acceptance of setmelanotide within the medical community, including physicians, patients and third-party payors. If IMCIVREE does not achieve an adequate level of acceptance by patients, physicians and third-party payors, we may not generate sufficient revenue to become or remain profitable. Before granting reimbursement approval, third-party payors may require us to demonstrate that, in addition to treating obesity caused by certain genetic deficiencies affecting the MC4R pathway, IMCIVREE also provides incremental health benefits to patients. Our efforts to educate the medical community and third-party payors about the benefits of IMCIVREE may require significant resources and may never be successful. All of these challenges may impact our ability to ever successfully market and sell IMCIVREE.

Market acceptance of IMCIVREE will depend on a number of factors, including, among others:

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the ability of IMCIVREE to provide chronic weight management in patients with obesity caused by certain genetic deficiencies affecting the MC4R pathway and, if required by any competent authority in connection with the approval for these indications, to provide patients with incremental health benefits, as compared with other available treatments, therapies, devices or surgeries;

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the complexities of genetic testing, including obtaining genetic results that support patient treatment with IMCIVREE;

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the relative convenience and ease of SC injections as the necessary method of administration of IMCIVREE, including as compared with other treatments for obese patients;

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the prevalence and severity of any adverse side effects associated with IMCIVREE;

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limitations or warnings contained in the labeling approved for IMCIVREE by the FDA or the specific obligations imposed as a condition for marketing authorization imposed by other equivalent competent authorities in foreign jurisdictions, particularly by the European Commission;

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availability of alternative treatments, including a number of obesity therapies already approved or expected to be commercially launched in the near future;

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our ability to increase awareness of these diseases among our target populations through marketing and other cross-functional efforts;

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the size of the target patient population, and the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies;

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the ability of IMCIVREE to treat the maximum range of pediatric patients, and any limitations on its indications for use;

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the strength of marketing and distribution support and timing of market introduction of competitive products;

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publicity concerning IMCIVREE or competing products and treatments;

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pricing and cost effectiveness;

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the effectiveness of our sales and marketing strategies;

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our ability to increase awareness of IMCIVREE through marketing efforts;

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our ability to obtain sufficient third-party coverage or reimbursement;

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the willingness of patients to pay out-of-pocket in the absence of third-party coverage; and

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the likelihood that competent authorities in foreign jurisdictions may require development of a REMS as a condition of approval or post-approval, may not agree with our proposed REMS or may impose additional requirements that limit the promotion, advertising, distribution or sales of setmelanotide.

Our industry is intensely competitive. If we are not able to compete effectively against current and future competitors, we may not be able to generate revenue from the sale of IMCIVREE, our business will not grow and our financial condition and operations will suffer.

The biotechnology and pharmaceutical industries are intensely competitive and subject to rapid and significant technological change. We have competitors in a number of jurisdictions, many of which have substantially greater name recognition, commercial infrastructures and financial, technical and personnel resources than we have. Established competitors may invest heavily to quickly discover and develop compounds that could make IMCIVREE obsolete or uneconomical. Any new product that competes with an approved product may need to demonstrate compelling advantages in efficacy, convenience, tolerability and safety to be commercially successful. In addition, payers may require that patients try other medications known as step therapy or a “step-edit,” including medications approved for treatment of general obesity, before receiving reimbursement for IMCIVREE. Other competitive factors, including generic competition, could force us to lower prices or could result in reduced sales. In addition, new products developed by others could emerge as competitors to IMCIVREE. If we are not able to compete effectively against our current and future competitors, our business will not grow and our financial condition and operations will suffer.

Currently, IMCIVREE is the only approved treatment for providing chronic weight management in patients with obesity due to POMC, PCSK1 or LEPR deficiencies, and there are no approved treatments for chronic weight management in patients with BBS, Alström syndrome, deficiencies due to a variant in one of the two alleles in the POMC, PCSK1, or LEPR genes (HET obesity), SRC1 deficiency obesity, SH2B1 deficiency obesity, MC4R deficiency obesity, or Smith-Magenis syndrome. Bariatric surgery is not a treatment option for these genetic diseases of obesity because the severe obesity and hyperphagia associated with these diseases are considered to be risk factors for bariatric surgery. Based on search results from ClinicalTrials.gov, we are unaware of any competitive products in therapeutic clinical studies for the obesity and hyperphagia caused by upstream MC4R pathway deficiencies specifically, however LG Chem has represented it is in early-stage clinical development of an MC4R agonist. New competitors may emerge which could limit our business opportunity in the future.

We face potential product liability exposure, and, if claims are brought against us, we may incur substantial liability.

The use of setmelanotide in clinical trials and the sale of IMCIVREE exposes us to the risk of product liability claims. Product liability claims might be brought against us by patients, healthcare providers or others selling or otherwise coming into contact with IMCIVREE. For example, we may be sued if any product we develop allegedly causes injury or is found to be otherwise unsuitable during product testing, manufacturing, marketing or sale. Any such product liability claims may include allegations of defects in manufacturing, defects in design or a failure to warn of dangers inherent in the product, including as a result of interactions with alcohol or other drugs, negligence, strict liability and a breach of

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warranties. Claims could also be asserted under state consumer protection laws and any equivalent laws in foreign countries. If we become subject to product liability claims and cannot successfully defend ourselves against them, we could incur substantial liabilities. In addition, regardless of merit or eventual outcome, product liability claims may result in, among other things:

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withdrawal of patients from our clinical trials;

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substantial monetary awards to patients or other claimants;

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decreased demand for IMCIVREE or any future product candidates following marketing approval, if obtained;

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damage to our reputation and exposure to adverse publicity;

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litigation costs;

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distraction of management’s attention from our primary business;

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loss of revenue; and

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the inability to successfully commercialize IMCIVREE or any future product candidates, if approved.

We maintain product liability insurance coverage for our clinical trials with a $10.0 million annual aggregate coverage limit. Our insurance coverage may be insufficient to reimburse us for any expenses or losses we may suffer. Moreover, in the future, we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses, including if insurance coverage becomes increasingly expensive. With the FDA approval for IMCIVREE, we may seek to expand our insurance coverage to include the sale of commercial products. However, we may not be able to obtain this product liability insurance on commercially reasonable terms. Large judgments have been awarded in class action lawsuits based on drugs that had unanticipated side effects. The cost of any product liability litigation or other proceedings, even if resolved in our favor, could be substantial, particularly in light of the size of our business and financial resources. A product liability claim or series of claims brought against us could cause our stock price to decline and, if we are unsuccessful in defending such a claim or claims and the resulting judgments exceed our insurance coverage, our financial condition, business and prospects could be materially adversely affected.

We rely completely on ~~third‑party~~third-party suppliers to manufacture our clinical and commercial drug supplies of setmelanotide, and we intend to rely on third parties to produce ~~commercial supplies of setmelanotide and~~ preclinical, clinical and commercial supplies of any future product candidate.

We do not currently have, nor do we plan to acquire, the infrastructure or capability to ~~internally~~ manufacture our clinical and commercial drug supply ofinternally for setmelanotide, or any future product candidates, for use in the conduct of our preclinical studies and clinical trials, and we lack the internal resources and the capability to manufacture any product candidate on a clinical or commercial scale. The facilities used by our contract manufacturing organizations, or CMOs, to manufacture the active pharmaceutical ingredient, or API, and final drug product must pass inspection by the FDA and other equivalent competent authorities in foreign jurisdictions pursuant to inspections that ~~would~~have been and will be conducted ~~after we submit~~following submission of our NDAs or relevant foreign regulatory submission to the other equivalent competent authorities in foreign jurisdictions. Our failure or the failure of our CMOs to pass preapproval inspection of the manufacturing facilities of setmelanotide could delay the regulatory approval process. In addition, our clinical

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trials must be conducted with products produced under cGMP regulations. Our failure or the failure of our CROs or CMOs to comply with these regulations may require us to repeat clinical trials, which would delay the regulatory approval process and could also subject us to enforcement action, including civil and criminal penalties. IfWhen we import any drugs or drug substances, we would be subject to FDA, United States Department of Agriculture, and U.S. Bureau of Customs and Border Patrol ~~or CBP,~~ import regulation requirements. Such enforcement for our failure or our CROs or CMOs’ failure to comply with these regulations could result in import delays, detention of products, and, depending on criteria such as the history of violative

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activities, the FDA could place a foreign firm or certain drug substances or products on Import Alert and require that all such drug substances or products be subject to detention without physical examination ~~or DWPE,~~ which could significantly impact the global supply chain for setmelanotide. ~~FDARA provides that prescription drug products, with~~With the exception of those on the FDA’s drug shortage list or properly imported by individuals, ~~may not be imported~~the FDCA prohibits the importation of prescription drug products for commercial use if they were manufactured in a foreign country, unless they have been approved or are otherwise authorized to be marketed in the United States and are labeled accordingly.

We currently contract with a third ~~party~~parties for the manufacture of setmelanotide and intend to continue to do so in the future. We have entered into a process development and manufacturing ~~services agreement~~service agreements with our CMOs, Corden Pharma Brussels ~~S.A,~~S.A., or Corden, ~~formerly~~(formerly Peptisyntha SA prior to its acquisition by ~~Corden, under which Corden will provide~~Corden), PolyPeptide Group, Baine L’Alleud, or PPL, Neuland Laboratories, and Recipharm Monts S.A.S. for certain process development and manufacturing services ~~in connection with the manufacture of setmelanotide. We have also entered into a process development~~for regulatory starting materials and/or drug substance, or API, and ~~manufacturing services agreement with Recipharm Monts S.A.S, or Recipharm, under which Recipharm will provide certain process development and manufacturing services~~drug product in connection with the manufacture of setmelanotide. Under our agreements, we pay ~~both Corden and Recipharm~~these third parties for services in accordance with the terms of mutually agreed upon work orders, which we ~~Corden and Recipharm~~ may enter into from time to time. The agreement with Corden also provides that, subject to certain conditions, for a period following each product launch date, we will source from Corden a portion of our requirements for that product being sourced from non‑affiliate third parties. We may need to engage additional ~~third‑party~~third-party suppliers to manufacture our clinical and/or commercial, subject to approval, drug supplies. ~~In the future, if we approach commercialization of setmelanotide or any future product candidate, we will need to engage~~We also have engaged other third parties to assist in, among other things, ~~labeling, packaging,~~ distribution, ~~post‑approval~~post-approval safety reporting and pharmacovigilance activities. We cannot be certain that we can engage ~~third‑party~~third-party suppliers on terms as favorable as those that are currently in place.

We do not perform the manufacturing of any drug products and are completely dependent on our CMOs to comply with cGMPs for manufacture of both API and finished drug product. We recognize that we are ultimately responsible for ensuring that our drug substances and finished drug product are manufactured in accordance with cGMPs, and, therefore, the company’s management practices and oversight, including routine auditing, are critical. If our CMOs cannot successfully manufacture material that conform to our specifications and the strict regulatory requirements of the FDA or other equivalent competent authorities in foreign jurisdictions, they may be subject to administrative and judicial enforcement for ~~non‑compliance~~non-compliance and the drug products would be deemed misbranded or adulterated and prohibited from distribution into interstate commerce. Furthermore, all of our CMOs are engaged with other companies to supply and/or manufacture materials or products for such companies, which exposes our manufacturers to regulatory risks for the production of such materials and products. As a result, failure to satisfy the regulatory requirements for the production of those other company materials and products may affect the regulatory clearance of our CMOs’ facilities generally. In addition, satisfying the regulatory requirements for production of setmelanotide with multiple suppliers, while assuring more robust drug availability in the future, adds additional complexity and risk to regulatory approval. If the FDA or another equivalent competent foreign regulatory agency does not approve these facilities for the manufacture of setmelanotide or if it withdraws its approval in the future, we may need to find alternative manufacturing facilities, which would adversely impact our ability to develop, obtain regulatory approval for or market setmelanotide.

We are ~~currently in the process of~~ manufacturing finished drug product for use in our upcoming or ongoing clinical ~~trials.~~trials and for commercial supply. We believe we currently have a sufficient amount of finished setmelanotide ~~diluent~~ and placebo to complete our ongoing and planned clinical ~~trials.~~trials, and for initial commercial supply. However, these projections could change based on delays encountered with manufacturing activities, equipment scheduling and material lead times. Any such delays in the manufacturing of finished drug product could delay our planned clinical trials of setmelanotide and our commercial supply, which could delay, prevent or limit our ability to generate revenue and continue our business.

Moreover, as a result of the COVID-19 pandemic, certain of our suppliers and CMOs in Europe may be affected, which could disrupt their activities. As a result, we could face difficulty sourcing key components necessary to produce supply of setmelanotide, which may negatively affect our clinical development and commercialization activities. If the COVID-19 coronavirus further impacts business operations, including our CMOs and suppliers, we could face additional disruption to our supply chain that could affect the supply of drug product for preclinical, clinical trial and commercial use. Additionally, as our CMOs are producers of drug substances and drug products, including vaccines and therapeutics, they could be compelled by a national government, or choose themselves, to shift their resources to the production of a COVID-19 vaccine and/or therapeutics for COVID-19, which could disrupt any scheduled drug substance or drug product batches we may have and may prevent us from obtaining supplies for our programs in a timely manner to meet our development timelines.

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We do not have ~~long‑term~~long-term supply agreements in place with our contractors, ~~and each~~however, we are in the final stages of negotiations of new long term supply agreements with our CMOs. We currently place individual batch ~~of setmelanotide is~~or campaign orders with the CMOs/suppliers that are individually contracted under aexisting quality and supply ~~agreement.~~agreements. If we engage new contractors, such contractors must be approved by the FDA and other equivalent competent authorities in foreign jurisdictions. We will need to submit

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information to the FDA and other equivalent competent authorities in foreign jurisdictions describing the manufacturing changes. If manufacturing changes occur ~~post‑approval,~~post-approval, the FDA ~~will~~may have to approve these changes. We plan to continue to rely upon CMOs and, potentially, collaboration partners to manufacture commercial quantities of ~~setmelanotide, if approved.~~setmelanotide. Our current scale of manufacturing appears adequate to support all of our current needs for clinical trial and initial commercial supplies for setmelanotide. ~~If setmelanotide is approved,~~Going forward, we ~~will~~may need to identify additional CMOs or partners to produce setmelanotide on a larger scale.

Risks Related to Our Intellectual Property Rights

If we are unable to adequately protect our proprietary technology or maintain issued patents that are sufficient to protect setmelanotide, others could compete against us more directly, which would have a material adverse impact on our business, results of operations, financial condition and prospects.

Our commercial success will depend in part on our success in obtaining and maintaining issued patents and other intellectual property rights in the United States and elsewhere and protecting our proprietary technology. If we do not adequately protect our intellectual property and proprietary technology, competitors may be able to use our technologies and erode or negate any competitive advantage we may have, which could harm our business and ability to achieve profitability.

We cannot provide any assurances that any of our patents have, or that any of our pending patent applications that mature into issued patents will include, claims with a scope sufficient to protect setmelanotide. Other parties have developed technologies that may be related or competitive to our approach, and may have filed or may file patent applications and may have received or may receive patents that may overlap with our patent applications, either by claiming the same methods or formulations or by claiming subject matter that could dominate our patent position. The patent positions of biotechnology and pharmaceutical companies, including our patent position, involve complex legal and factual questions, and, therefore, the issuance, scope, validity and enforceability of any patent claims that we may obtain cannot be predicted with certainty.

Although an issued patent is presumed valid and enforceable, its issuance is not conclusive as to its validity or its enforceability and such patent may not provide us with adequate proprietary protection or competitive advantages against competitors with similar products. Patents, if issued, may be challenged, deemed unenforceable, invalidated or circumvented. U.S. patents and patent applications or the patents and patent application obtained or submitted pursuant to comparable foreign laws, may also be subject to interference proceedings, ex parte reexamination, inter partes review proceedings, ~~post‑grant~~post-grant review proceedings, supplemental examination and challenges in ~~district~~ court. Patents may be subjected to opposition or comparable proceedings lodged in various foreign, both national and regional, patent offices. These proceedings could result in either loss of the patent or denial of the patent application or loss or reduction in the scope of one or more of the claims of the patent or patent application. In addition, such proceedings may be costly. Thus, any patents that we may own or exclusively license may not provide any protection against competitors. Furthermore, an adverse decision in an interference proceeding can result in a third party receiving the patent right sought by us, which in turn could affect our ability to develop, market or otherwise commercialize setmelanotide.

Competitors may also be able to design around our patents. Other parties may develop and obtain patent protection for more effective technologies, designs or methods. The laws of some foreign countries do not protect our proprietary rights to the same extent as the laws of the United States, and we may encounter significant problems in protecting our proprietary rights in these countries. If these developments were to occur, they could have a material adverse effect on our sales.

In addition, proceedings to enforce or defend our patents could put our patents at risk of being invalidated, held unenforceable or interpreted narrowly. Such proceedings could also provoke third parties to assert claims against us, including that some or all of the claims in one or more of our patents are invalid or otherwise unenforceable. If any of our

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patents covering setmelanotide are invalidated or found unenforceable, our financial position and results of operations would be materially and adversely impacted. In addition, if a court found that valid, enforceable patents held by third parties covered setmelanotide, our financial position and results of operations would also be materially and adversely impacted.

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The degree of future protection for our proprietary rights is uncertain, and we cannot ensure that:

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any of our patents, or any of our pending patent applications, if issued, will include claims having a scope sufficient to protect setmelanotide;

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any of our pending patent applications will issue as patents;

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we will be able to successfully commercialize ~~setmelanotide, if approved,~~IMCIVREE before our relevant patents expire;

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we were the first to make the inventions covered by each of our patents and pending patent applications;

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we were the first to file patent applications for these inventions;

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others will not develop similar or alternative technologies that do not infringe our patents;

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any of our patents will be found to ultimately be valid and enforceable;

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any patents issued to us will provide a basis for an exclusive market for our commercially viable products, will provide us with any competitive advantages or will not be challenged by third parties;

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we will develop additional proprietary technologies or product candidates that are separately patentable; or

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our commercial activities or products will not infringe upon the patents of others.

We rely upon unpatented trade secrets, unpatented ~~know‑how~~know-how and continuing technological innovation to develop and maintain our competitive position, which we seek to protect, in part, by confidentiality agreements with employees, consultants, collaborators and vendors. We also have agreements with employees and selected consultants that obligate them to assign their inventions to us. It is possible that technology relevant to our business will be independently developed by a person who is not a party to such an agreement. We may not be able to prevent the unauthorized disclosure or use of our technical knowledge or trade secrets by consultants, collaborators, vendors, former employees and current employees. Furthermore, if the parties to our confidentiality agreements breach or violate the terms of these agreements, we may not have adequate remedies for any such breach or violation, and we could lose our trade secrets through such breaches or violations. Further, our trade secrets could otherwise become known or be independently discovered by our competitors.

We may be involved in lawsuits to protect or enforce our patents or the patents of our licensors, which could be expensive, ~~time‑consuming~~time-consuming and unsuccessful.

Competitors may infringe our patents or the patents of our licensors. To counter infringement or unauthorized use, we may be required to file infringement claims, which can be expensive and ~~time‑consuming~~time-consuming and divert the attention of our management and key personnel from our business operations. Even if we prevail in any lawsuits that we initiate, the damages or other remedies awarded may not be commercially meaningful. In addition, in an infringement proceeding, a court may decide that a patent of ours or our licensors is not valid, is unenforceable and/or is not infringed, or may refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the technology in question. An adverse result in any litigation or defense proceedings could put one or more of our patents at risk of being invalidated or interpreted narrowly and could put our patent applications at risk of not issuing.

Interference proceedings provoked by third parties or brought by us may be necessary to determine the priority of inventions with respect to our patents or patent applications or those of our licensors. An unfavorable outcome could

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require us to cease using the related technology or to attempt to license rights to it from the prevailing party. Our business could be harmed if the prevailing party does not offer us a license on commercially reasonable terms. Our defense of litigation or interference proceedings may fail and, even if successful, may result in substantial costs and distract our management and other employees. We may not be able to prevent, alone or with our licensors, misappropriation of our

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intellectual property rights, particularly in countries where the laws may not protect those rights as fully as in the United States.

Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. There could also be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a material adverse effect on the price of our common stock.

We may infringe the intellectual property rights of others, which may prevent or delay our product development efforts and stop us from commercializing or increase the costs of commercializing ~~setmelanotide, if approved.~~IMCIVREE.

Our success will depend in part on our ability to operate without infringing the intellectual property and proprietary rights of third parties. We cannot assure you that our business, products and methods do not or will not infringe the patents or other intellectual property rights of third parties. For example, numerous ~~third‑party~~third-party U.S. and ~~non‑U.S.~~non-U.S. patents and pending applications exist that cover melanocortin receptor analogs and methods of using these analogs.

The pharmaceutical industry is characterized by extensive litigation regarding patents and other intellectual property rights. Other parties may allege that setmelanotide or the use of our technologies infringes patent claims or other intellectual property rights held by them or that we are employing their proprietary technology without authorization. For example, we received a letter in January 2013 from a third party bringing to our attention several patents and patent applications, both U.S. and non‑U.S. We responded in April 2013 and have not received any further correspondence since then. Although most of the patents and patent applications mentioned in the letter were abandoned or not in force at the time the letter was sent to us, and subsequent to our response, the third party has allowed three additional U.S. patents to lapse for non‑payment of patent maintenance fees, we cannot assure you that the holder of these third‑party patents will not attempt to assert these patents against us.

Patent and other types of intellectual property litigation can involve complex factual and legal questions, and their outcome is uncertain. Any claim relating to intellectual property infringement that is successfully asserted against us may require us to pay substantial damages, including treble damages and attorney’s fees if we are found to be willfully infringing another party’s patents, for past use of the asserted intellectual property and royalties and other consideration going forward if we are forced or choose to take a license. In addition, if any such claim were successfully asserted against us and we could not obtain such a license, we may be forced to stop or delay developing, manufacturing, selling or otherwise commercializing ~~setmelanotide.~~IMCIVREE.

If we are unable to avoid infringing the patent rights of others, we may be required to seek a license, defend an infringement action or challenge the validity of the patents in court, or redesign our products. Patent litigation is costly and time consuming. We may not have sufficient resources to bring these actions to a successful conclusion.

In addition, in order to avoid infringing the intellectual property rights of third parties and any resulting intellectual property litigation or claims, we could be forced to do one or more of the following, which may not be possible and, even if possible, could be costly and ~~time‑consuming:~~time-consuming:

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cease development and commercialization of setmelanotide;

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pay substantial damages for past use of the asserted intellectual property;

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obtain a license from the holder of the asserted intellectual property, which license may not be available on reasonable terms, if at all; and

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in the case of trademark claims, rename ~~setmelanotide.~~

setmelanotide and/or its trade name IMCIVREE.

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Any of these risks coming to fruition could have a material adverse effect on our business, results of operations, financial condition and prospects.

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We may be subject to claims challenging the inventorship or ownership of our patents and other intellectual property.

We may also be subject to claims that former employees, collaborators or other third parties have an ownership interest in our patents or other intellectual property. Litigation may be necessary to defend against these and other claims challenging inventorship or ownership. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, such intellectual property. Such an outcome could have a material adverse effect on our business. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.

Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non‑compliance with these requirements.

The U.S. Patent and Trademark Office, or U.S. PTO, and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other provisions during the patent process. There are situations in which noncompliance can result in abandonment or lapse of a patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. In such an event, competitors might be able to enter the market earlier than would otherwise have been the case.

Issued patents covering setmelanotide could be found invalid or unenforceable if challenged in court.

If we or one of our licensing partners threatened or initiated legal proceedings against a third party to enforce a patent covering setmelanotide, the defendant could claim that the patent covering setmelanotide is invalid and/or unenforceable. In patent litigation in the United States, defendant counterclaims alleging invalidity and/or unenforceability are commonplace. Grounds for a validity challenge include alleged failures to meet any one of several statutory requirements, including novelty, ~~non‑obviousness~~non-obviousness and enablement. Grounds for unenforceability assertions include allegations that someone connected with prosecution of the patent withheld material information from the U.S. PTO, or made a misleading statement, during patent prosecution. Third parties may also raise similar claims before administrative bodies in the United States or abroad, even outside the context of litigation. Such mechanisms include ~~re‑examination,~~ re-examination, inter partes review, post grant review and equivalent proceedings in foreign jurisdictions, for example, opposition proceedings. Such proceedings could result in revocation or amendment of our patents in such a way that they no longer cover setmelanotide or competitive products. The outcome following legal assertions of invalidity and/or unenforceability is unpredictable. With respect to validity, for example, we cannot be certain that there is no invalidating prior art, of which we and the patent examiner were unaware during prosecution. If a defendant were to prevail on a legal assertion of invalidity and/or unenforceability, we would lose at least part, and perhaps all, of the patent protection on setmelanotide. Such a loss of patent protection would have a material adverse impact on our business.

We do not seek to protect our intellectual property rights in all jurisdictions throughout the world and we may not be able to adequately enforce our intellectual property rights even in the jurisdictions where we seek protection.

Filing, prosecuting and defending patents on setmelanotide in all countries and jurisdictions throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the United States could be less extensive than those in the United States. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the United States. Consequently, we may not be able to prevent third parties from practicing our inventions in all countries outside the United States, or from selling or importing products made using our inventions in and into the United States or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and further, may export otherwise infringing products to territories where we have patent protection, but enforcement is not as strong as that in the United States. These products may compete with our product and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.

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Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents and other intellectual property protection, particularly those relating to biopharmaceuticals, which could make it difficult for us to stop the infringement of our patents or marketing of competing products in violation of our proprietary rights generally. For example, an April 2017 report from the Office of the United States Trade Representative identified a number of countries, including India and China, where challenges to the procurement and enforcement of patent rights have been reported. Several countries, including India and China, have been listed in the report every year since 1989. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly, could put our patent applications at risk of not issuing and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual property rights around

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the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.

We are dependent on licensed intellectual property. If we were to lose our rights to licensed intellectual property, we may not be able to continue developing or commercializing ~~setmelanotide, if approved.~~setmelanotide.

We have licensed our rights to setmelanotide from Ipsen Pharma SAS, or Ipsen. Our license with Ipsen imposes various obligations on us, and provides Ipsen the right to terminate the license in the event of our material breach of the license agreement, our failure to initiate or complete development of a licensed product, or our commencement of an action seeking to have an Ipsen licensed patent right declared invalid. Termination of our license from Ipsen would result in our loss of the right to use the licensed intellectual property, which would materially adversely affect our ability to develop and commercialize setmelanotide, as well as harm our competitive business position and our business prospects.

We also have licensed from Camurus its drug delivery technology, FluidCrystal, to formulate setmelanotide. Our license with Camurus imposes various obligations on us, and provides Camurus the right to terminate the license in the event of our material breach of the license agreement. Termination of our license from Camurus would result in our inability to use the licensed intellectual property.

We may enter into additional licenses to ~~third‑party~~third-party intellectual property that are necessary or useful to our business. Future licensors may also allege that we have breached our license agreement and may accordingly seek to terminate our license with them. In addition, future licensors may have the right to terminate our license at will. Any termination could result in our loss of the right to use the licensed intellectual property, which could materially adversely affect our ability to develop and commercialize setmelanotide, ~~if approved,~~ as well as harm our competitive business position and our business prospects.

We have not yet registered trademarks for a commercial trade name for setmelanotide in the United States and certain foreign jurisdictions and failure to secure such registrations could adversely affect our business.

We have applied for, but not yet received, registered ~~trademarks~~trademark for athe commercial trade name IMCIVREE (setmelanotide) and its logo in the United States, and we have obtained trademark protection for ~~setmelanotide. Any future~~IMCIVREE in certain foreign jurisdictions and are pursuing trademark registrations in other jurisdictions. Our trademark applications may be rejected during trademark registration proceedings. Although we would be given an opportunity to respond to those rejections, we may be unable to overcome them. In addition, in the U.S. PTO and in comparable agencies in many foreign jurisdictions, third parties are given an opportunity to oppose pending trademark applications and to seek to cancel registered trademarks. Opposition or cancellation proceedings may be filed against our trademarks, and our trademarks may not survive those proceedings. ~~Moreover, any~~

Additionally, while the trade name ~~we propose to use for setmelanotide in~~IMCIVREE has been accepted by the ~~United States~~FDA, the name IMCIVREE must be approved by the ~~FDA, regardless~~EMA. The objective of ~~whether we have registered it,~~the assessment conducted by the EMA is to ensure that there is no risk that the proposed brand name could create a public-health concern or ~~applied~~potential safety risk. In particular the proposed brand name should not convey misleading therapeutic or pharmaceutical connotations; be misleading with respect to ~~register it, as a trademark. The FDA typically conducts a review~~the composition of ~~proposed product names, including an evaluation of potential for~~the product; or be liable to cause confusion with ~~other~~the brand name of an existing medicinal product ~~names.~~ in print, handwriting or speech. If the ~~FDA~~EMA objects to any of our proposed product ~~names,~~name, we may be required to expend significant additional resources in an effort to identify a suitable substitute name that would be acceptable to the EMA, qualify under applicable trademark laws and not infringe the existing rights of third ~~parties and be acceptable to the FDA.~~parties.

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If we do not obtain additional protection under the ~~Hatch‑Waxman~~Hatch-Waxman Amendments and similar foreign legislation by extending the patent terms and obtaining product exclusivity for setmelanotide, our business may be materially harmed.

Depending upon the timing, duration and specifics of FDA marketing approval for setmelanotide, one or more of the U.S. patents we license may be eligible for limited patent term restoration under the Drug Price Competition and Patent Term Restoration Act of 1984, referred to as the ~~Hatch‑Waxman~~Hatch-Waxman Amendments. The ~~Hatch‑Waxman~~Hatch-Waxman Amendments permit a patent term restoration of up to five years as compensation for patent term lost during product development and the FDA regulatory review ~~process.~~process, and we have applied to the U.S. PTO for patent term extension. However, we may not be

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granted an extension because of, for example, failure to apply within applicable deadlines, failure to apply prior to expiration of relevant patents or otherwise failure to satisfy applicable requirements. Moreover, the applicable time period or the scope of patent protection afforded could be less than we request. If we are unable to obtain patent term extension or restoration or the term of any such extension is less than we request, our competitors may obtain approval of competing products following our patent expiration, and our ability to generate revenues could be materially adversely affected.

~~While we believe that~~Because setmelanotide contains active ingredients that ~~would be treated by~~ the FDA ashas determined to be a new chemical entity, ~~or a new drug product, and, therefore, if approved, should be~~it has been afforded five years of marketing exclusivity by the FDA. Following the expiration of this marketing exclusivity, the FDA may ~~disagree with that conclusion and may~~ approve generic ~~products within a period that is less than five years.~~products. Manufacturers may seek to launch these generic products following the expiration of the applicable marketing exclusivity period, even if we still have patent protection for setmelanotide. Recent legislation enacted by Congress created, among other things, new causes of action against innovator companies that refuse to offer samples of drugs for purposes of testing and developing generic or biosimilar products or to allow companies to participate in a shared Risk Evaluation and Mitigation Strategy (REMS). Competition that setmelanotide may face from generic versions could materially and adversely impact our future revenue, profitability and cash flows and substantially limit our ability to obtain a return on the investments we have made in setmelanotide.

In the EU, the grant of orphan designation for setmelanotide means that this medicinal product would be entitled, upon grant of marketing authorization by the European Commission, to ten years of exclusivity in all EU member states. Marketing authorization may, however, be granted to a similar medicinal product with the same orphan indication during the ten year period if we are unable to supply sufficient quantities of setmelanotide. Marketing authorization may also be granted to a similar medicinal product with the same orphan indication if the similar product is deemed safer, more effective or otherwise clinically superior to setmelanotide. The period of market exclusivity may, in addition, be reduced to six years if it can be demonstrated on the basis of available evidence that setmelanotide is sufficiently profitable not to justify maintenance of market exclusivity.

If we fail to obtain an extension of patent protection under similar foreign legislation, where applicable, our competitors may obtain approval of competing products following our patent expiration, and our ability to generate revenues could be materially adversely affected in the foreign countries concerned.

Changes in U.S. patent law could diminish the value of patents in general, thereby impairing our ability to protect our product.

The United States has enacted and is currently implementing the America Invents Act of 2011, ~~wide‑ranging~~wide-ranging patent reform legislation. Further, the U.S. Supreme Court has ruled on several patent cases in recent years, either narrowing the scope of patent protection available in certain circumstances or weakening the rights of patent owners in certain situations. In addition to increasing uncertainty with regard to our ability to obtain future patents, this combination of events has created uncertainty with respect to the value of patents, once obtained. Depending on decisions by the U.S. Congress, the federal courts and the U.S. PTO, the laws and regulations governing patents could change in unpredictable ways that would weaken our ability to obtain new patents or to enforce our existing patents or future patents.

We may be subject to damages resulting from claims that we or our employees have wrongfully used or disclosed alleged trade secrets of their former employers.

Our employees have been previously employed at other biotechnology or pharmaceutical companies, including our competitors or potential competitors. We may be subject to claims that these employees or we have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of the former employers of our employees. Litigation may be necessary to defend against these claims. Even if we are successful in defending against these claims, litigation could result in substantial costs and be a distraction to management. If we fail in defending such claims, in addition to paying money damages, we may lose valuable intellectual property rights or personnel. A loss of key personnel or their work product could hamper or prevent our ability to commercialize setmelanotide, which would materially adversely affect our commercial development efforts.

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Risks Related to Regulatory Approval and Marketing of Setmelanotide and Other Legal Compliance Matters

Even if we complete the necessary clinical trials, the regulatory and marketing approval process is expensive, time consuming and uncertain and may prevent us from obtaining additional approvals for the commercialization of ~~setmelanotide.~~setmelanotide beyond FDA approval for obesity due to POMC, PCSK1or LEPR deficiencies in the United States. We depend entirely on the success of setmelanotide, ~~which is in Phase 3 clinical development for treatment of POMC deficiency obesity~~ and ~~LepR deficiency obesity. We~~we cannot be certain that we will be able to obtain additional regulatory ~~approval~~approvals for, or successfully commercialize, setmelanotide. If we are not able to obtain, or if there are delays in obtaining, required additional regulatory approvals, we will not be able to commercialize setmelanotide in additional indications in the United States or in foreign jurisdictions, and our ability to generate revenue will be materially impaired.

We currently have only one product candidate, setmelanotide, in clinical development, and our business depends entirely on its successful clinical development, regulatory approval and commercialization. ~~We currently have no drug products for sale and may never be able to develop marketable drug products.~~ Setmelanotide, which is currently approved by FDA for chronic weight management in ~~Phase 3 clinical development as a treatment for genetic~~patients with obesity due to POMC, PCSK1 or LEPR deficiencies, ~~affecting the MC4 pathway, including POMC deficiency obesity~~ and ~~LepR deficiency obesity,~~ will require substantial additional clinical development, testing and regulatory approval before we are permitted to commence ~~commercialization.~~commercialization in indications beyond those currently approved for IMCIVREE in the United States. The clinical trials, ~~of setmelanotide are, and the~~ manufacturing and marketing of setmelanotide ~~will be,~~are subject to extensive and rigorous review and regulation by numerous government authorities in the United States and in other countries where we intend to test and, if approved, market setmelanotide.

Before obtaining regulatory approvals for the commercial sale of any product candidate, we must demonstrate through ~~non‑clinical~~non-clinical testing and clinical trials that the product candidate is safe and effective for use in each target indication. This process can take many years and approval, if any, may be conditional on ~~post‑marketing~~post-marketing studies and surveillance, and will require the expenditure of substantial resources beyond ~~the proceeds we raised from~~ our IPO. When a sponsor relies exclusively or predominantly on foreign clinical data, the FDA may require a showing that those data are applicable to the U.S. population and U.S. medical practice, which in some cases may require bridging studies or other evidence.existing cash resources. Of the large number of drugs in development in the United States and in other countries, only a small percentage will successfully complete the FDA regulatory approval process or the equivalent process in foreign jurisdictions and will be commercialized. In addition, we have not discussed all of our proposed development programs with the FDA of the competent authorities of foreign jurisdictions. Accordingly, even if we are able to obtain the requisite financing to continue to fund our development and clinical trials, we cannot assure you that setmelanotide will be successfully developed or commercialized.

~~We are not permitted to market setmelanotide in the United States until we receive~~In addition, obtaining FDA approval of an NDA from the FDA, or in any foreign jurisdictions until we receive the requisite approval from such countries. We have two Phase 3 clinical trials underway, one each for the treatment of POMC deficiency obesity and LepR deficiency obesity. Under our current development program, we plan to conduct a single Phase 3 clinical trial for POMC deficiency obesity. To date, in our ongoing discussions with the FDA, the agency has not asked for additional Phase 3 trials in POMC deficiency obesity, but the agency could still require us to conduct additional Phase 3 clinical trials for this indication. Moreover, for POMC deficiency obesity, the FDA could alter its previous advice on many aspects of the trial—the small size, the open label design, the amount of past medical history available on individual patients, the statistical analysis plan, the definition of clinically‑relevant success for the protocol, entry of patients ages 12 or over—all of which may impact the timing and ability to obtain FDA approval. There are other aspects of the trial for which we have not received advice from the FDA, such as the number of U.S. versus non‑U.S. patients and the number of patients with POMC gene defects versus the number of patients with PCSK1 defects, which could also impact the timing of and our ability to obtain FDA approval. We have not discussed the protocol for a Phase 3 program for LepR deficiency obesity with the FDA and thus we do not know if the FDA will provide advice on this trial that differs from the advice provided by the FDA for the trial in POMC deficiency obesity. Therefore, the timeline for enrollment, availability of data, and cost of conducting such trials are uncertain, and could be less favorable than those applicable to the POMC deficiency obesity program.

In addition, the FDA and other equivalent competent authorities in foreign jurisdictions will expect for there to be no introduction of bias in the open‑label Phase 3 trials. Accordingly, we proposed to the FDA that little, if any, efficacy data will be available to us in any form until the Phase 3 trials are complete.

The FDA or other regulatory authorities and other equivalent competent authorities in foreign jurisdictions will also require that we conduct one or more pivotal trials for each other indication sought. In addition, we are not sure if one

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or more Phase 3 trials would be required for approval in each other indication. The need and length of placebo‑controlled data in these pivotal trials and the number of patients required for these approvals is also unclear. We expect to seek an indication for obesity caused by monogenic deficiencies affecting the MC4 pathway. We are currently conducting Phase 3 trials for treatment of setmelanotide in POMC deficiency obesity and LepR deficiency obesity and Phase 2 trials for treatment of Bardet‑Biedl syndrome, Alström syndrome, POMC heterozygous deficiency obesity, and POMC epigenetic disorders. If the clinical data meet key primary and secondary endpoints for safety and efficacy, our overall clinical program may be less time consuming and require fewer patients than might a program for a broader obesity indication.

In the European Union we are currently conducting the Phase 3 clinical trial RM‑493‑012 in Germany and the United Kingdom. In France, the clinical trial application has recently been approved by the competent authorities. On March 23, 2017, we received EMA scientific advice on the appropriateness and sufficiency of the non‑clinical and clinical development programs to support an initial marketing authorization application in POMC deficiency obesity. The EMA scientific advice included preliminary advice on the clinical trial RM‑493‑012. The EMA expressed general support for the ongoing Phase 3 program in POMC deficiency obesity. The EMA, advised that the regulatory strategy for a rare disorder is supported, and that the EMA may have to rely on scarce data. The EMA advised, however, that we need to consider whether full approval, approval under conditional or exceptional circumstances would be the most appropriate pathway for application for POMC deficiency obesity.

Given the orphan status of setmelanotide for the treatment of POMC deficiency in the European Union the marketing authorization application for a POMC deficiency obesity indication will be submitted via the centralized procedure. In addition, we plan to submit a pediatric investigation plan for setmelanotide to the EMA Pediatric Development Committee in 2017.

We cannot assure you that the clinical trials we are conducting in the European Union will be completed within this timeline. Similar to the United States, we are subject to comprehensive regulatory oversight by the EMA and the competent authorities of the individual EU member states where we are conducting our clinical trials. Failure by us or by any of our third party partners to comply with EU laws and the related national laws of individual EU member states governing the conduct of clinical trials may result in the suspension of clinical trials and in other administrative, civil, or criminal penalties.

Our plan is to expand our internal clinical development operations and capabilities so that we can continue to enroll and manage our Phase 2 clinical trials, and enroll and manage our Phase 3 clinical trials, such that, if the clinical trials are successful, we can file an NDA for POMC deficiency obesity in the United States by 2019. We believe we have finalized the design, timing and size of our Phase 3 trial for POMC deficiency obesity with the FDA but we cannot assure you that the trial will not be subject to further modification or that it will be completed on time. In addition, obtaining approval of an NDAindications and the approval of ~~a marketing authorization application~~an MAA from the European Commission is a complex, lengthy, expensive and uncertain process, and the FDA, EMA or equivalent competent authorities in foreign jurisdictions may delay, limit or deny approval of setmelanotide for many reasons, including, among others:

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the FDA, the EMA, or other equivalent competent authorities in foreign jurisdictions may disagree with our interpretation of data from clinical trials, or may change the requirements for approval even after it has reviewed and commented on the design for our clinical trials;

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we may not be able to demonstrate to the satisfaction of the FDA, the EMA, or other equivalent competent authorities in foreign jurisdictions that setmelanotide is safe and effective in treating obesity caused by certain genetic deficiencies affecting the ~~MC4~~MC4R pathway;

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the results of our clinical trials may not be interpretable or meet the level of statistical or clinical significance required by the FDA, the EMA, or other equivalent competent authorities in foreign jurisdictions for marketing approval. For example, the potential unblinding of setmelanotide studies due to easily identifiable ~~adverse events~~AEs may raise the concern that potential bias has affected the clinical trial results;

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the FDA, the EMA, or other equivalent competent authorities in foreign jurisdictions may disagree with the number, size, conduct or implementation of our clinical trials;

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the FDA, the EMA, or other equivalent competent authorities in foreign jurisdictions may require that we conduct additional clinical trials or ~~pre‑clinical~~pre-clinical studies;

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the FDA, the EMA, or other equivalent competent authorities in foreign jurisdictions may not consider that our diagnostic strategy supports approval;

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the FDA, the EMA, or other equivalent competent authorities in foreign jurisdictions may decide that additional assays or data to understand any risks for anti-drug antibodies may need to be available for approval;

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the FDA, the EMA, or other equivalent competent authorities in foreign jurisdictions may decide that the toxicology program, including any parts of carcinogenicity studies that are filed, do not meet the requirements for approval;

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the FDA, the EMA, or other equivalent competent authorities in foreign jurisdictions or the applicable foreign regulatory agency may identify deficiencies in our chemistry, manufacturing or controls of ~~setmelanotide;~~

setmelanotide, or in the commercial production of setmelanotide to support product approval;

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the CROs that we retain to conduct our clinical trials may take actions outside of our control that materially adversely impact our clinical trials;

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the FDA, the EMA, or other equivalent competent authorities in foreign jurisdictions may find the data from preclinical studies and clinical trials insufficient to demonstrate that clinical and other benefits of setmelanotide outweigh its safety risks;

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the FDA, the EMA, or other equivalent competent authorities in foreign jurisdictions may disagree with our interpretation of data from our preclinical studies and clinical trials;

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the FDA, the EMA, or other equivalent competent authorities in foreign jurisdictions may not approve the formulation, labeling or specifications of setmelanotide;

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the FDA, the EMA, or other equivalent competent authorities in foreign jurisdictions may not accept data generated at our clinical trial sites;

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~~if and when our NDA or our marketing authorization application is submitted and reviewed by an advisory committee,~~ the FDA, the EMA, or the equivalent competent authorities in foreign jurisdictions may have difficulties scheduling an advisory committee meeting in a timely manner or the advisory committee may recommend against approval of our application or may recommend that the FDA, the EMA, or the equivalent competent authorities in foreign jurisdictions require, as a condition of approval, additional preclinical studies or clinical trials, limitations on approved labeling or distribution and use restrictions;

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as part of our NDA approval, we were required to complete certain post-market requirements and commitments, which we may not be able to meet;

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the FDA may require development of a REMS as a condition of ~~approval or post‑approval, or may not agree with our proposed REMS~~additional approvals or may impose additional requirements that limit the promotion, advertising, distribution, or sales of ~~setmelanotide. In addition,~~ setmelanotide;

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the European Commission may grant only conditional approval marketing authorization or impose specific obligations as a condition for marketing authorization, or may require us to conduct post authorization safety studies as a condition of grant of marketing authorization;

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the FDA or other equivalent competent foreign regulatory ~~agency~~agencies may deem our manufacturing processes or our facilities or the facilities of our CMOs inadequate to preserve the identity, strength, quality, purity, or potency of our product; or

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the FDA, the European Commission, or the equivalent competent authorities in foreign jurisdictions may change its approval policies or adopt new regulations and guidance.

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Any of these factors, many of which are beyond our control, could jeopardize our ability to obtain additional regulatory ~~approval~~approvals for and successfully market ~~setmelanotide.~~IMCIVREE. Moreover, because our business is entirely dependent upon setmelanotide, any such setback in our pursuit of regulatory ~~approval~~approvals would have a material adverse effect on our business and prospects.

Disruptions at the FDA and other government agencies caused by funding shortages or global health concerns could hinder their ability to hire, retain or deploy key leadership and other personnel, or otherwise prevent new or modified products from being developed, approved or commercialized in a timely manner or at all, which could negatively impact our business.

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the FDA to review and or approve new products can be affected by a variety of factors, including government budget and funding levels, statutory, regulatory, and policy changes, the FDA’s ability to hire and retain key personnel and accept the payment of user fees, and other events that may otherwise affect the FDA’s ability to perform routine functions. Average review times at the agency have fluctuated in recent years as a result. In addition, government funding of other government agencies that fund research and development activities is subject to the political process, which is inherently fluid and unpredictable. Disruptions at the FDA and other agencies may also slow the time necessary for new drugs and biologics to be reviewed and/or approved by necessary government agencies, which would adversely affect our business. For example, over the last several years, including for 35 days beginning on December 22, 2018, the U.S. government has shut down several times and certain regulatory agencies, such as the FDA, have had to furlough critical FDA employees and stop critical activities.

Separately, in response to COVID-19, on March 10, 2020 the FDA announced its intention to postpone most foreign inspections of manufacturing facilities and products through April 2020, and subsequently, on March 18, 2020, the FDA temporarily postponed routine surveillance inspections of domestic manufacturing facilities. Subsequently, on July 10, 2020 the FDA announced its intention to resume certain on-site inspections of domestic manufacturing facilities subject to a risk-based prioritization system. The FDA intends to use this risk-based assessment system to identify the categories of regulatory activity that can occur within a given geographic area, ranging from mission critical inspections to resumption of all regulatory activities. In addition, on April 15, 2021, the FDA issued a guidance document in which the FDA outlined plans to conduct voluntary remote interactive evaluations of certain drug manufacturing facilities and clinical research sites. According to the guidance, the FDA intends to request such remote interactive evaluations in situations where an in-person inspection would not be prioritized, deemed mission-critical or is otherwise limited by travel restrictions, but where the FDA determines that a remote evaluation would still be appropriate. Regulatory authorities outside the United States may adopt similar restrictions or other policy measures in response to the COVID-19 pandemic. If a prolonged government shutdown occurs, or if global health concerns continue to prevent the FDA or other regulatory authorities from conducting their regular inspections, reviews, or other regulatory activities, it could significantly impact the ability of the FDA or other regulatory authorities to timely review and process our regulatory submissions, which could have a material adverse effect on our business.

Our failure to obtain marketing approval in foreign jurisdictions would prevent setmelanotide from being marketed abroad, and any ~~approval~~current or future approvals we ~~are~~have been or may be granted for setmelanotide in the United States would not assure approval of setmelanotide in foreign jurisdictions.

In order to market and sell setmelanotide and any other product candidate that we may develop in the ~~European Union~~EU and many other jurisdictions, we or our ~~third‑party~~third-party collaborators must obtain separate marketing authorizations and comply with numerous and varying regulatory requirements. The ~~approval~~marketing authorization procedure varies among countries and can involve additional testing. The time required to obtain ~~approval~~marketing authorization may differ substantially from that required to obtain FDA approval. The ~~regulatory approval~~marketing authorization process outside the United States generally includes all of the risks associated with obtaining FDA approval. In addition, in many countries outside the United States, it is required that the product be approved for reimbursement before the product can be sold in that country. We or these third parties may not obtain ~~approvals~~marketing authorization from competent authorities outside the United States on a timely basis, if at all. Approval by the FDA does not ensure ~~approval~~grant of marketing authorization by competent authorities in other countries or jurisdictions, and ~~approval~~grant of marketing authorization by one competent authority outside the United States does not ensure ~~approval~~grant of marketing authorization by competent authorities in other countries or jurisdictions or by the FDA. We may not be able to file for marketing ~~approvals~~authorizations and may not receive necessary ~~approvals~~marketing authorization to commercialize

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setmelanotide in any market. Additionally, ~~on June 23, 2016, the electorate in~~ the United ~~Kingdom voted in favor of leaving~~Kingdom’s withdrawal from the ~~European Union,~~EU, commonly referred to as ~~Brexit. On March 29, 2017,~~Brexit, has resulted in the ~~country formally notified the European Union of its intention to withdraw pursuant to Article 50~~relocation of the ~~Lisbon Treaty. Since a significant proportion~~EMA from the United Kingdom to the Netherlands. This relocation has caused, and may continue to cause, disruption in the administrative and medical scientific links between the EMA and the United Kingdom. Medicines and Healthcare products Regulatory Agency, including delays in granting clinical trial authorization or marketing authorization, disruption of importation and export of active substance and other components of new drug formulations, and disruption of the supply chain for clinical trial product and final authorized formulations. The cumulative effects of the disruption to the regulatory framework ~~in the United Kingdom is derived from European Union directives and regulations, the referendum could materially impact the regulatory regime with respect~~may add considerably to the ~~approval~~development lead time to marketing authorization and commercialization of setmelanotide in the ~~United Kingdom~~ EU and/or the ~~European Union.~~United Kingdom. Any delay in obtaining, or an inability to obtain, any marketing ~~approvals,~~authorization, as a result of Brexit or otherwise, would prevent us from commercializing setmelanotide in the United Kingdom and/or the ~~European Union~~EU and restrict our ability to generate revenue and achieve and sustain profitability. If any of these outcomes occur, we may be forced to restrict or delay efforts to seek ~~regulatory approval~~marketing authorization in the United Kingdom and/or ~~European Union~~EU for setmelanotide, which could significantly and materially harm our business.

~~Even if we obtain~~The terms of our current and future potential marketing ~~approval~~approvals for setmelanotide ~~the terms of approval~~ and ongoing regulation may limit how we manufacture and market setmelanotide, and compliance with such requirements may involve substantial resources, which could materially impair our ability to generate revenue.

~~Even if we receive marketing approval for setmelanotide, regulatory~~Regulatory authorities may impose significant restrictions on setmelanotide’s indicated uses or marketing or impose ongoing requirements for potentially costly post approval studies. ~~Setmelanotide~~We and setmelanotide will also be subject to ongoing requirements by the FDA, the European Commission, the EMA, and the competent authorities in the EU member states, governing labeling, packaging, storage, advertising, promotion, marketing, distribution, importation, exportation, ~~post‑approval,~~post-approval changes, manufacturing, recordkeeping, and submission of safety and other post market information. Advertising and promotional materials must comply with the FDCA and implementing regulations, and are subject to FDA oversight and post-marketing reporting obligations, in addition to other potentially applicable federal and state laws. The FDA and the other competent foreign authorities ~~haves~~have significant post market authority, including, for example, the authority to require labeling changes based on new safety information and to require post market studies or clinical trials to evaluate serious safety risks related to the use of a drug. The FDA also has the authority to require, as part of an NDA or post approval, the submission of a REMS, which may include Elements to Assure Safe ~~Use, or ETASU.~~Use. Any REMS required by the FDA may lead to increased costs to assure compliance with new post approval regulatory requirements and potential requirements or restrictions on the sale of approved products, all of which could lead to lower sales volume and revenue. The holder of an approved NDA also must submit new or supplemental applications and obtain FDA approval for certain changes to the approved product, product labeling or manufacturing process, or adding new manufacturers.

Manufacturers of drug products and their facilities may be subject to payment of application and program fees and are subject to continual review and periodic inspections by the FDA and other equivalent competent authorities for compliance with cGMPs and other regulations. If we or a regulatory agency discover problems with setmelanotide, such as ~~adverse events~~AEs of unanticipated severity or frequency, or problems with the facility where setmelanotide is manufactured or disagrees with the promotion, marketing or labeling of the product, a regulatory agency may impose restrictions on setmelanotide, the manufacturer or us, including requiring withdrawal of setmelanotide from the market or suspension of manufacturing. If we ~~setmelanotide~~ or the manufacturing facilities for setmelanotide fail to comply with applicable regulatory requirements, a regulatory agency may, among other things:

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issue warning letters or untitled letters;

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seek an injunction or impose civil or criminal penalties or monetary fines;

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vary, suspend or withdraw marketing approval;

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suspend any ongoing clinical trials;

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refuse to approve pending applications or supplements to applications submitted by us;

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suspend or impose restrictions on operations, including costly new manufacturing requirements; or

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seize or detain setmelanotide, refuse to permit the import or export of setmelanotide, or request that we initiate a product recall.

Any government investigation of alleged violations of law could require us to expend significant time and resources in response and could generate negative publicity. The occurrence of any event or penalty described above may inhibit our ability to commercialize our product candidates and adversely affect our business, financial condition, results of operations and prospects.

Accordingly, ~~assuming we receive marketing approval for setmelanotide,~~ we and our CMOs will continue to expend time, money and effort in all areas of regulatory compliance, including manufacturing, production, product surveillance and quality control. If we are not able to comply with ~~post‑approval~~post-approval regulatory requirements, we could have the marketing approvals for setmelanotide withdrawn by regulatory authorities and our ability to market any future products could be limited, which could adversely affect our ability to achieve or sustain profitability. Thus, the cost of compliance with ~~post‑approval~~post-approval regulations may have a negative effect on our operating results and financial condition.

In addition, a sponsor’s responsibilities and obligations under the FDCA and FDA regulations, and those of equivalent foreign regulatory agencies, may change and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of our product candidates. We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action, either in the United States or abroad. For example, the results of the 2020 U.S. Presidential Election may impact our business and industry. Namely, the Trump administration took several executive actions, including the issuance of a number of Executive Orders, that could impose significant burdens on, or otherwise materially delay, the FDA’s ability to engage in routine oversight activities such as implementing statutes through rulemaking, issuance of guidance, and review and approval of marketing applications. It is difficult to predict whether or how these orders will be implemented, or whether they will be rescinded and replaced under the Biden administration. The policies and priorities of the new administration are unknown and could materially impact the regulations governing our product candidates. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may be subject to enforcement action and we may not achieve or sustain profitability.

Similar to the United States, both marketing authorization holders and manufacturers of medicinal products are subject to comprehensive regulatory oversight by the EMA and the competent authorities of the individual EU member states, both before and after grant of the manufacturing and ~~Marketing Authorizations.~~marketing authorizations. This oversight includes control of compliance with cGMP rules, which govern quality control of the manufacturing process and require documentation policies and procedures. We and our third party manufacturers would be required to ensure that all of our processes, methods, and equipment are compliant with cGMP. Failure by us or by any of our third party partners, including suppliers, manufacturers, and distributors to comply with EU laws and the related national laws of individual EU member states governing the conduct of clinical trials, manufacturing approval, marketing authorization of medicinal products, both before and after grant of marketing authorization, and marketing of such products following grant of authorization may result in administrative, civil, or criminal penalties. These penalties could include delays in or refusal to authorize the conduct of clinical trials or to grant ~~Marketing Authorization,~~marketing authorization, product withdrawals and recalls, product seizures, suspension, revocation or variation of the marketing authorization, total or partial suspension of production, distribution, manufacturing, or clinical trials, operating restrictions, injunctions, suspension of licenses, fines, and criminal penalties.

In addition, EU legislation related to pharmacovigilance, or the assessment and monitoring of the safety of medicinal products, provides that the EMA and the competent authorities of the EU member states have the authority to require companies to conduct additional ~~post‑approval~~post-approval clinical efficacy and safety studies. The legislation also governs the obligations of marketing authorization holders with respect to additional monitoring, ~~adverse event~~AE management and reporting. Under the pharmacovigilance legislation and its related regulations and guidelines, we may be required to conduct a labor intensive collection of data regarding the risks and benefits of marketed products and may be required to engage in ongoing assessments of those risks and benefits, including the possible requirement to conduct additional clinical studies, which may be ~~time‑consuming~~time-consuming and expensive and could impact our profitability. ~~Non‑compliance~~Non-compliance with such obligations can lead to the variation, suspension or withdrawal of marketing authorization or imposition of financial penalties or other enforcement measures.

~~Recently enacted~~61

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Current and future healthcare reform legislation or regulation may increase the difficulty and cost for us and any future collaborators to ~~obtain marketing approval of and~~ commercialize setmelanotide and may adversely affect the prices we, or they, may obtain and may have a negative impact on our business and results of operations.

In the United States and some foreign jurisdictions there have been, and continue to be, a number of legislative and regulatory changes and proposed changes regarding the healthcare system that could, among other things, ~~prevent or delay marketing approval of setmelanotide,~~ restrict or regulate ~~post‑approval~~post-approval activities with respect to IMCIVREE and affect our ability, or the ability of any future collaborators, to profitably sell ~~any products for which we, or they, obtain marketing approval.~~our products. Among policy makers and payors in the United States and elsewhere, there is significant interest in promoting changes in healthcare systems with the stated goals of containing healthcare costs, improving quality and/or expanding access. In the United States, the pharmaceutical industry has been a particular focus of these efforts and has been significantly affected by major legislative

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initiatives. We expect that current laws, as well as other healthcare reform measures that may be adopted in the future, may result in more rigorous coverage criteria and in additional downward pressure on the price that we, or any future collaborators, may receive for IMCIVREE or any product candidates approved ~~products.~~for sale.

In March 2010, President Obama signed into law the Patient Protection and Affordable Care Act, as amended by the Health Care and Education ~~Affordability~~ Reconciliation Act of 2010, or collectively the ACA. The ACA substantially changed the way healthcare is financed by both governmental and private insurers, and significantly affects the U.S. pharmaceutical industry. Among the provisions of the ACA of importance to our business, including, without limitation, our ability to commercialize and the prices we may obtain for any ~~of setmelanotide and~~product candidates that are approved for sale, are the following:

●

an annual, nondeductible fee on any entity that manufactures or imports specified branded prescription drugs and biologic agents, apportioned among these entities according to their market share in certain government healthcare programs, although this fee does not apply to sales of certain products approved exclusively for orphan indications;

●

expansion of eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to certain individuals with income at or below 133% of the federal poverty level, thereby potentially increasing a manufacturer’s Medicaid rebate liability;

●

expansion of manufacturers’ rebate liability under the Medicaid Drug Rebate Program by increasing the minimum rebate for both branded and generic drugs, ~~and~~ revising the ~~definition of~~ “average manufacturer ~~price,” or AMP, for calculating and reporting Medicaid drug rebates on outpatient prescription drug prices~~price” definition, and extending rebate liability from fee-for-service Medicaid utilization to ~~prescriptions for individuals enrolled in Medicare Advantage plans;~~

include the utilization of Medicaid managed care organizations as well as Medicaid managed care;

●

~~introduction~~expansion of ~~a price reporting requirement for drugs that are inhaled, instilled, implanted, injected, or infused and not generally dispensed through retail community pharmacies;~~

~~addition~~the list of ~~more~~ entity types eligible for participation in the Public Health Service ~~the~~ 340B drug pricing program, or the 340B ~~program;~~

program, to include certain free-standing cancer hospitals, critical access hospitals, rural referral centers, and sole community hospitals, but exempting “orphan drugs” from the 340B ceiling price requirements for these covered entities;

●

~~established~~establishment of the Medicare Part D coverage gap discount program, ~~by requiring~~which requires manufacturers to provide a ~~50% point‑of‑sale‑discount~~70% point-of-sale-discount off the negotiated price of applicable brand drugs to eligible beneficiaries during their coverage gap period as a condition for the manufacturers’ outpatient drugs to be covered under Medicare Part D;

●

a new ~~Patient‑Centered~~Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research;

and

●

the Independent Payment Advisory Board, or IPAB, which has authority to recommend certain changes to the Medicare program to reduce expenditures by the program that could result in reduced payments for prescription drugs. However, the IPAB implementation has been not been clearly defined. ACA provided that under certain circumstances, IPAB recommendations or recommendationsestablishment of ~~the Secretary of Health and Human Services will become law unless Congress enacts legislation that will achieve the same or greater Medicare cost savings; and~~

~~established~~ the Center for Medicare and Medicaid Innovation within CMS to test innovative payment and service delivery models to lower Medicare and Medicaid spending, ~~potentially~~ including prescription drug spending.

Certain provisions of the ACA have been subject to judicial challenges as well as efforts to repeal or replace them or to alter their interpretation or implementation. For example, the Tax Cuts and Jobs Act enacted on December 22, 2017,

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eliminated the tax-based shared responsibility payment for individuals who fail to maintain minimum essential coverage under section 5000A of the Internal Revenue Code of 1986, as amended, or the Code, commonly referred to as the “individual mandate,” effective January 1, 2019. On December 14, 2018, a U.S. District Court Judge in the Northern District of Texas, ruled that the individual mandate is a critical and inseverable feature of the ACA, and therefore, because it was repealed as part of the Tax Act, the remaining provisions of the ACA are invalid as well. On December 18, 2019, the U.S. Court of Appeals for the 5th Circuit upheld the district court’s decision that the individual mandate was unconstitutional but remanded the case back to the District Court to determine whether the remaining provisions of the ACA are invalid as well. The U.S. Supreme Court is currently reviewing the case, although it is unclear when a decision will be made or how the Supreme Court will rule. It is possible that the ACA, as currently enacted or as it may be amended in the future, and other healthcare reform measures that may be adopted in the future, could have a material adverse effect on our industry generally and on our ability to successfully commercialize IMCIVREE or any product candidates, if approved.

In addition, other legislative changes have been proposed and adopted since the ACA was enacted. For example, beginning April 1, 2013, Medicare payments ~~for all items and services, including drugs and biologics,~~to providers were reduced by 2% under the sequestration ~~(i.e., automatic spending reductions)~~ required by the Budget Control Act of 2011, ~~as amended by~~which will remain in effect through 2030, with the exception of a temporary suspension from May 1, 2020 through March 31, 2021 due to the COVID-19 pandemic. Legislation is currently pending in Congress that would further extend the suspension through December 31, 2021. On January 2, 2013, the American Taxpayer Relief Act of ~~2012. Subsequent~~2012 was signed into law, which, among other things, further reduced Medicare payments to several providers, including hospitals, imaging centers and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. Moreover, the federal government and the individual states in the United States have become increasingly active in developing proposals, passing legislation ~~extended the 2% reduction, on average,~~and implementing regulations designed to ~~2025. Sequestration~~control drug pricing, including price or patient reimbursement constraints, discounts, formulary flexibility, marketing cost disclosure and transparency measures. These initiatives may result in additional reductions in Medicare and other healthcare funding and, if we obtain regulatory

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approvals, may otherwise affect the prices we may obtain for setmelanotide or the frequency with which setmelanotide is prescribed or used if approved.

Legislative changes to or regulatory changes under the ACA remain possible and appear likely in the 115th U.S. Congress and under the Trump administration. The nature and extent of any legislative or regulatory changes to the ACA, including repeal and replacement initiatives, are uncertain at this time. It is possible that ACA repeal and replacement initiatives, if enacted into law, could ultimately result in fewer individuals having health insurance coverage or in individuals having insurance coverage with less generous benefits. The scope of potential future legislation to modify or repeal and replace ACA provisions is highly uncertain in many respects.

Additional changes that may affect our business include the expansion of new programs such as Medicare payment for performance initiatives for physicians under the Medicare Access and CHIP Reauthorization Act of 2015, or MACRA, which ~~will be~~was fully implemented in 2019. At this time, it is unclear how the introduction of ~~the~~this Medicare quality payment program will impact overall physician reimbursement. The ~~costs~~cost of prescription pharmaceuticals in the United States has also been the subject of considerable discussion in the United ~~States, and members of Congress and the Administration~~States. There have ~~stated that they will address such costs through new legislative and administrative measures. This focus has resulted in~~been several Congressional inquiries, as well as legislative and ~~proposed bills~~regulatory initiatives and executive orders designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drug products. Members of Congress and the Biden Administration have indicated they will continue to pursue legislative or administrative measures to control prescription drug costs, although the likelihood of such measures being adopted remains uncertain. We cannot predict with certainty what impact any federal or state health reforms will have on us, but such changes could impose new or more stringent regulatory requirements on our activities or result in reduced reimbursement for our products, any of which could adversely affect our business, results of operations and financial condition.

We expect that these and other healthcare reform measures that may be adopted in the future may result in more rigorous coverage and payment criteria and in additional downward pressure on the price that we receive for any approved drug. Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private payors. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability, or commercialize our drugs. We expect that additional state and federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare products and services, which could result in reduced demand for our drug candidates or additional pricing pressures.

The pricing of prescription pharmaceuticals is also subject to governmental control outside the United States. In these countries, pricing negotiations with governmental authorities can take considerable time after the receipt of marketing approval for a product. To obtain reimbursement or pricing approval in some countries, we may be required to conduct a clinical trial that compares the cost effectiveness of setmelanotide to other available therapies. If reimbursement

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of our products is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, our ability to generate revenues and become profitable could be impaired. For more details concerning the risks related to pricing and reimbursement in the EU, please refer to the discussion in the risk factor “The successful commercialization of setmelanotide and our other product candidates will depend in part on the extent to which governmental authorities, private health insurers, and other third-party payors provide coverage and adequate reimbursement levels. Failure to obtain or maintain coverage and adequate reimbursement for setmelanotide or our other product candidates, if approved, could limit our ability to market those products and decrease our ability to generate revenue” in this Quarterly Report.

If we participate in the Medicaid Drug Rebate Program and fail to comply with our reporting and payment obligations under that program or other governmental pricing programs that we participate in, we could be subject to additional reimbursement requirements, penalties, sanctions and fines, which could have a material adverse effect on our business, financial condition, results of operations and growth prospects.

We ~~expect~~intend to participate in and have certain price reporting obligations to the Medicaid Drug Rebate ~~program. Under the~~Program The Medicaid Drug Rebate ~~program, if we successfully commercialize setmelanotide, we would be required~~Program requires participating manufacturers to pay a rebate to each state Medicaid program for ~~our~~ covered outpatient drugs that are dispensed to Medicaid beneficiaries and paid for by a state ~~Medicaid program as a condition of having federal funds being made available to the states for our drugs under Medicaid and Medicare Part B.~~Medicaid. Those rebates are based on pricing data ~~we would have to report~~that must be reported on a monthly and quarterly basis to the ~~Centers for Medicare and Medicaid Services, or~~ CMS, the federal agency that administers the Medicaid Drug Rebate ~~program.~~Program. These data include the average manufacturer price and, in the case of innovator products, the best price for each drug which, in general, represents the lowest price available from the manufacturer to any entity in the U.S. in any pricing structure, calculated to include all sales and associated rebates, discounts and other price concessions. Our failure to comply with these price reporting and rebate payment obligations ~~if we participate in the program~~ could negatively impact our financial results.

~~Table~~The ACA made significant changes to the Medicaid Drug Rebate Program, as described under the risk factor “Current and future healthcare reform legislation or regulation may increase the difficulty and cost for us and any future collaborators to obtain marketing approval of ~~Contents~~

and commercialize setmelanotide and may adversely affect the prices we, or they, may obtain and may have a negative impact on our business and results of operations,” above. Congress could enact additional legislation that further increases Medicaid drug rebates or other costs and charges associated with participating in the Medicaid Drug Rebate Program. Additional legislation or the issuance of regulations relating to the Medicaid Drug Rebate Program could have a material adverse effect on our results of operations.

Federal law requires that any company that participates in the Medicaid Drug Rebate ~~program~~Program also participate in the 340B program in order for federal funds to be available for the manufacturer’s drugs under Medicaid and Medicare Part B. The 340B program, which is administered by the Health Resources and Services Administration, or HRSA, requires participating manufacturers to agree to charge statutorily defined covered entities no more than the 340B “ceiling price” for the manufacturer’s covered outpatient drugs. These 340B covered entities include a variety of community health clinics and other entities that receive health services grants from the Public Health Service, as well as hospitals that serve a disproportionate share of ~~low‑income~~low-income patients. The ACA expanded the list of covered entities to include certain ~~free‑standing~~free-standing cancer hospitals, critical access hospitals, rural referral centers and sole community hospitals, but exempts “orphan drugs” from the ceiling price requirements for these covered entities. The 340B ceiling price is calculated using a statutory formula based on the average manufacturer price and rebate amount for the covered outpatient drug as calculated under the Medicaid Drug Rebate ~~program,~~Program, and in general, products subject to Medicaid price reporting and rebate liability are also subject to the 340B ceiling price calculation and discount requirement. Any additional future changes to the definition of average manufacturer price and the Medicaid rebate amount under the ACA or other legislation or regulation could affect our 340B ceiling price calculations and negatively impact our results of operations if we successfully commercialize setmelanotide.

HRSA issued a final regulation regarding the calculation of the 340B ceiling price and the imposition of civil monetary penalties on manufacturers that knowingly and intentionally overcharge covered entities, which became effective on January 1, 2019. It remains uncertain how HRSA will apply its enforcement authority under the new regulation. HRSA also has implemented reporting requirement pursuant to which participating manufacturers are required to report the 340B ceiling prices for their drugs to HRSA every quarter. In addition, legislation may be introduced that, if passed, would further expand the 340B program to additional covered entities or would require participating manufacturers to agree to provide 340B discounted pricing on drugs used in an inpatient setting.

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Pricing and rebate calculations vary among products and programs. The calculations are complex and are often subject to interpretation by us, governmental or regulatory agencies, and the courts. If we participate in the Medicaid Drug Rebate Program and consequently the 340B program, we could be held liable for errors associated with our submission of pricing data. In addition to retroactive Medicaid rebates and the potential for 340B program refunds, if we are found to have knowingly submitted false average manufacturer price or best price information to the government, we may be liable for significant civil monetary penalties per item of false information. Civil monetary penalties can also be applied if we are found to have charged 340B covered entities more than the statutorily mandated ceiling price. Our failure to submit monthly/quarterly average manufacturer price and best price data on a timely basis could result in a significant civil monetary penalty per day for each day the information is late beyond the due date. Such failure also could be grounds for CMS to terminate our Medicaid drug rebate agreement, pursuant to which we would be participating in the Medicaid program. In the event that CMS terminates our rebate agreement, no federal payments would be available under Medicaid or Medicare Part B for our covered outpatient drugs.

CMS and the Department of Health & Human Services Office of Inspector General have pursued manufacturers that were alleged to have failed to report these data to the government in a timely manner. Governmental agencies may also make changes in program interpretations, requirements or conditions of participation, some of which may have implications for amounts previously estimated or paid. We cannot assure you that any submissions we are required to make under the Medicaid Drug Rebate Program and consequently the 340B program will not be found to be incomplete or incorrect.

In order for IMCIVREE or any product candidates, if approved, to be ~~eligible to have our products that we successfully commercialize~~ paid for with federal funds under the Medicaid ~~program~~and Medicare Part B programs and purchased by certain federal agencies and grantees, we also ~~would have~~intend to participate in the U.S. Department of Veterans Affairs, or VA, Federal Supply Schedule, or FSS, pricing program. As part of this program, we would be obligated to make our products available for procurement on an FSS contract under which we must comply with standard government terms and conditions and charge a price that is no higher than the statutory Federal Ceiling Price, or FCP, to four federal agencies (VA, U.S. Department of Defense, or DOD, Public Health Service, and U.S. Coast Guard).

~~Civil~~The FCP is based on the Non-Federal Average Manufacturer Price, or Non-FAMP, which we would be required to calculate and report to the VA on a quarterly and annual basis. Pursuant to applicable law, knowing provision of false information in connection with a Non-FAMP filing can subject a manufacturer to significant civil monetary penalties ~~can be applied if~~for each item of false information. The FSS pricing and contracting obligations also contain extensive disclosure and certification requirements.

If we ~~participate in these programs and if~~successfully commercialize our products, we ~~are found to have knowingly submitted any false price information to the government or if we fail to submit the required price data on a timely basis. Such conduct~~ also ~~could be grounds for CMS to terminate the Medicaid drug rebate agreement pursuant to which we~~ would participate in the ~~Medicaid drug rebate~~Tricare Retail Pharmacy program, under which we would be required to pay quarterly rebates on utilization of innovator products that are dispensed through the Tricare Retail Pharmacy network to Tricare beneficiaries. The rebates are calculated as the difference between the annual Non-FAMP and FCP. We would be required to list our innovator products on a Tricare Agreement in ~~which case federal payments may not be available under Medicaid~~order for ~~our covered outpatient drugs. We cannot assure you that our submissions will not be found by CMS or another government agency~~them to be ~~incomplete or incorrect.~~

eligible for DOD formulary inclusion. If we ~~obtain marketing approval for setmelanotide,~~overcharge the government in connection with our FSS contract or Tricare Agreement, whether due to a misstated FCP or otherwise, we ~~will~~would be ~~subject~~required to ~~strict enforcement of post‑marketing requirements and we~~refund the difference to the government. Failure to make necessary disclosures and/or to identify contract overcharges could ~~be subject to substantial penalties, including withdrawal of our product from the market, if we fail to comply with all regulatory requirements.~~

~~If we obtain marketing approval for setmelanotide, we will be subject to continual requirements of and review by the FDA and equivalent competent authorities~~result in foreign jurisdictions. These requirements may include, but are not limited to, post‑approval studies to be conducted which may include carcinogenicity studies, a QT interval prolongation study in one form or another, and ongoing natural history studies with patient registries. Other requirements may also include, among other things, restrictions governing promotion of an approved product, submissions of safety and other post‑marketing information and reports, registration and listing requirements, cGMP requirements relating to manufacturing, quality control, quality assurance and corresponding maintenance of records and documents, and requirements regarding the distribution of samples to physicians and recordkeeping. The FDA and other federal and state agencies, including the Department of Justice and other equivalent competent authorities in foreign jurisdictions, closely regulate compliance with all requirements governing prescription drug products, including requirements pertaining to marketing and promotion of drugs in accordance with the provisions of the approved labeling and manufacturing of products in accordance with cGMP requirements. Violations of such requirements may lead to investigations alleging violations of the FDCA, and other statutes, includingallegations against us under the False Claims Act and other ~~federal~~laws and ~~state health care fraud~~regulations. Unexpected refunds to the government, and ~~abuse~~responding to a government investigation or enforcement action, would be expensive and time-consuming, and could have a material adverse effect on our business, financial condition, results of operations and growth prospects.

The FDA and other regulatory agencies actively enforce the laws ~~as well as state consumer protection laws.~~and regulations prohibiting the promotion of off-label uses.

In the United States, the FDA strictly regulates marketing, labeling, advertising and promotion of prescription drugs. These regulations include standards and restrictions for direct-to-consumer advertising, industry-sponsored scientific and educational activities, promotional activities involving the internet and off-label promotion. Any regulatory approval that the FDA grants is limited to those specific diseases and indications for which a product is deemed to be safe and effective by the FDA. For example, the FDA-approved label for IMCIVREE is limited to chronic weight management in adult and pediatric patients 6 years of age and older with obesity due to POMC, PCSK1, or LEPR deficiency confirmed

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by genetic testing demonstrating variants in POMC, PCSK1, or LEPR genes that are interpreted as pathogenic, likely pathogenic, or of uncertain significance. In addition to the FDA approval required for new formulations, any new indication for an approved product also requires FDA approval. If we are not able to obtain FDA approval for any desired future indications for our drugs and ~~other equivalent competent authorities in foreign jurisdictions strictly regulate the promotional claims that~~drug candidates, our ability to effectively market and sell our products may be ~~made about prescription products, such as setmelanotide, if approved. In particular, a product~~reduced and our business may ~~not~~ be ~~promoted~~adversely affected.

While physicians in the United States may choose, and are generally permitted, to prescribe drugs for uses that are not described in the product’s labeling and for uses that differ from those tested in clinical trials and approved by the ~~FDA or such~~regulatory authorities, our ability to promote the products is narrowly limited to those indications that are specifically approved by the FDA. These “off-label” uses are common across medical specialties and may constitute an appropriate treatment for some patients in varied circumstances. For example, we are actively evaluating IMCIVREE in subjects with other ~~regulatory agencies as reflected in~~

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~~the product’s approved labeling. If we receive marketing approval for setmelanotide as a treatment for~~ obesity caused by defects in the MCR4 pathway. We are not currently permitted to, and do not, market or promote setmelanotide for these uses.

Regulatory authorities in the United States generally do not regulate the behavior of physicians in their choice of treatments. Regulatory authorities do, however, restrict communications by pharmaceutical companies on the subject of off-label use. Although recent court decisions suggest that certain ~~genetic deficiencies affecting~~off-label promotional activities may be protected under the ~~MC4 pathway, physicians may nevertheless prescribe setmelanotide~~First Amendment, the scope of any such protection is unclear. If our promotional activities fail to ~~their patients in a manner that is inconsistent~~comply with the ~~approved labeling. If we are found to have promoted such off‑label uses,~~FDA’s regulations or guidelines, we may ~~become~~be subject to ~~significant liability. The federal government has levied large civil~~warnings from, or enforcement action by, these authorities. In addition, our failure to follow FDA rules and ~~criminal fines against companies for alleged improper~~guidelines relating to promotion and ~~has enjoined several companies~~advertising may cause the FDA to issue warning letters or untitled letters, bring an enforcement action against us, suspend or withdraw an approved product from ~~engaging~~the market, require a recall or institute fines or civil fines, or could result in ~~off‑label promotion. The FDA has also requested that companies enter into consent decrees~~disgorgement of money, operating restrictions, injunctions or ~~permanent injunctions under~~criminal prosecution, any of which ~~specified promotional conduct is changed or curtailed. Oversight~~could harm our reputation and management of promotional practices may require operational changes and additions, if setmelanotide is approved and commercialized. If we cannot successfully manage the promotion of setmelanotide, if approved, we could become subject to significant liability, which would materially adversely affect our ~~business and financial condition.~~business.

In the ~~European Union,~~EU, the advertising and promotion of our products are subject to EU laws governing promotion of medicinal products, interactions with physicians, misleading and comparative advertising and unfair commercial practices. In addition, other legislation adopted by individual EU member states may apply to the advertising and promotion of medicinal products. These laws require that promotional materials and advertising in relation to medicinal products comply with the product’s Summary of Product Characteristics, or SmPC, as approved by the competent authorities. The SmPC is the document that provides information to physicians concerning the safe and effective use of the medicinal product. It forms an intrinsic and integral part of the marketing authorization granted for the medicinal product. Promotion of a medicinal product that does not comply with the SmPC is considered to constitute ~~off‑label~~off-label promotion. The ~~off‑label~~off-label promotion of medicinal products is prohibited in the ~~European Union.~~EU. The applicable laws at ~~European Union~~EU level and in the individual EU member states also prohibit the ~~direct‑to‑consumer~~direct-to-consumer advertising of ~~prescription‑only~~prescription-only medicinal products. Violations of the rules governing the promotion of medicinal products in the ~~European Union~~EU could be penalized by administrative measures, fines and imprisonment. These laws may further limit or restrict the advertising and promotion of our products to the general public and may also impose limitations on our promotional activities with health care professionals.

We may be subject to federal and state healthcare laws and regulations. If we are unable to comply or have not fully complied with such laws and regulations, we could face criminal sanctions, damages, substantial civil penalties, reputational harm and diminished profits and future earnings.

Healthcare providers, physicians and others will play a primary role in the recommendation and prescription of setmelanotide, if approved. Our arrangements and interactions with healthcare professionals, ~~third‑party~~third-party payors, patients and others will expose us to broadly applicable fraud and abuse, ~~anti‑kickback,~~anti-kickback, false claims and other healthcare laws and regulations that may constrain the business or financial arrangements and relationships through which we market, sell and distribute setmelanotide, if we obtain marketing approval. The U.S. federal and state healthcare laws and regulations that may affect our ability to operate include, but are not limited to:

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The United States federal ~~Anti‑Kickback~~healthcare Anti-Kickback Statute, which prohibits, among other things, persons and entities from knowingly and willfully soliciting, offering, paying, or receiving remuneration, (anything of value), directly or indirectly, in cash or in kind, to induce or reward either the referral of an individual for, or the purchase, lease order or arranging for or recommending of the purchase, lease or order of any good or service for which payment may be made, in whole or in part, by federal healthcare programs such as Medicare

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and Medicaid. This statute has been interpreted to apply to arrangements between pharmaceutical companies on one hand and prescribers, purchasers, ~~and~~ formulary managers, and patients on the other. Liability under the ~~Anti‑Kickback~~Anti-Kickback Statute may be established without proving actual knowledge of the statute or specific intent to violate it. In addition, the government may assert that a claim including items or services resulting from a violation of the federal Anti‑Kickback Statute constitutes a false or fraudulent claim for purposes of the federal civil False Claims Act. Although there are a number of statutory ~~exemptions~~exceptions and regulatory safe harbors to the federal ~~Anti‑Kickback~~Anti-Kickback Statute protecting certain common business arrangements and activities from prosecution or regulatory sanctions, the ~~exemptions~~exceptions and safe harbors are drawn narrowly. Practices that involve remuneration to those who prescribe, purchase, or recommend pharmaceutical and biological products, including certain discounts, or engaging such individuals or patients as consultants, advisors, or speakers, may be subject to scrutiny if they do not fit squarely within an ~~exemption~~exception or safe harbor. Our practices may not in all cases meet all of the criteria for safe harbor protection from ~~anti‑kickback~~anti-kickback liability. Moreover, there are

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no safe harbors for many common practices, such as educational and research grants, charitable donations, product ~~support~~ and patient ~~assistance~~support programs.

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The federal civil False Claims Act prohibits individuals or entities from, among other things, knowingly presenting, or causing to be presented a false or fraudulent claim for payment of government funds, or knowingly making, using or causing to made or used a false record or statement material to an obligation to pay money to the government or knowingly concealing or knowingly and improperly avoiding, decreasing or concealing an obligation to pay money to the federal government. Actions under the False Claims Act may be brought by the Attorney General or as a qui tam action by a private individual in the name of the government. Such private individuals may share in amounts paid by the entity to the government in recovery or settlement. Many pharmaceutical manufacturers have been investigated and have reached substantial financial settlements with the federal government under the civil False Claims Act for a variety of alleged improper activities including causing false claims to be submitted as a result of the marketing of their products for unapproved and thus ~~non‑reimbursable~~non-reimbursable uses, inflating prices reported to private price publication services which are used to set drug payment rates under government healthcare programs, and other interactions with prescribers and other customers including those that may have affected their billing or coding practices and submission to the federal government. The government may assert that a claim including items or services resulting from a violation of the federal ~~Anti‑Kickback~~Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal civil False Claims Act. False Claims Act liability is potentially significant in the healthcare industry because the statute provides for treble damages and significant mandatory penalties per false or fraudulent claim or statement for violations. Because of the potential for large monetary exposure, healthcare and pharmaceutical companies often resolve allegations without admissions of liability for significant and material amounts to avoid the uncertainty of treble damages and per claim penalties that may be awarded in litigation proceedings. Settlements may require companies to enter into corporate integrity agreements with the government, which may impose substantial costs on companies to ensure compliance. Pharmaceutical and other healthcare companies also are subject to other federal false claims laws, including, among others, federal criminal healthcare fraud and false statement statutes that extend to ~~non‑government~~non-government health benefit programs.

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The federal Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health Act, or HIPAA, imposes criminal and civil liability for executing a scheme to defraud any healthcare benefit program, including private third-party payors, and also imposes obligations, with respect to safeguarding the privacy, security and transmission of individually identifiable health information.

Penalties for failure to comply with a requirement of HIPAA vary significantly and include civil monetary penalties as well as criminal penalties for knowingly obtaining or disclosing individually identifiable health information in violation of HIPAA. The criminal penalties increase if the ~~federal~~wrongful conduct involves false ~~statements statute~~pretenses or the intent to sell, transfer or use identifiable health information for commercial advantage, personal gain or malicious harm. HIPAA also prohibits knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement or representation, or making or using any false writing or document knowing the same to contain any materially false, fictitious or fraudulent statement or entry in connection with the delivery of or payment for healthcare benefits, items or services.

Similar to the federal healthcare Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it to have committed a violation.

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Numerous federal and state laws and regulations that address privacy and data security, including state data breach notification laws, state health information privacy laws, and federal and state consumer protection laws (e.g., Section 5 of the FTC Act), govern the collection, use, disclosure and protection of health‑related and other personal information.

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The ~~federal transparency requirement known as the~~ federal Physician Payments Sunshine Act, ~~being~~ implemented as the Open Payments Program, requires certain manufacturers of drugs, devices, biologics and medical supplies to report payments and other transfers of value to physicians ~~and teaching hospitals, as well as ownership and investments interests held by physicians and their immediate family members. Pharmaceutical and biological manufacturers with products~~ for which payment is available under Medicare, Medicaid or the ~~State~~ Children’s Health Insurance Program ~~are required~~(with certain exceptions) to ~~submit a~~ report annually to the United States Department of Health and Human Services, Centers for Medicare and Medicaid Services, ~~within the U.S. Department~~information related to physicians (defined to include doctors, dentists, optometrists, podiatrists, and chiropractors) and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members. Beginning in 2022, applicable manufacturers also will be required to report information regarding payments and transfers of ~~Health~~value provided to physician assistants, nurse practitioners, clinical nurse specialists, certified nurse anesthetists, anesthesiology assistants and ~~Human Services~~certified nurse-midwives. Manufacturers must submit reports on or before the 90th day of each calendar year disclosing reportable payments made in the previous calendar year.

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Analogous state laws and regulations, such as state ~~anti‑kickback~~anti-kickback and false claims laws, which may apply to items or services reimbursed under Medicaid and other state programs or, in several states, regardless of the ~~payer.~~payer, including private insurers. Some state laws ~~also~~ require pharmaceutical companies to report expenses relating to the marketing and promotion of pharmaceutical products and to report gifts and payments to ~~certain~~individual health care providers in those states. Some of these states also prohibit certain ~~marketing‑related~~marketing-related activities including the provision of gifts, meals, or other items to certain health care providers. Some states restrict the ability of manufacturers to offer co-pay support to patients for certain prescription drugs. Some states require the posting of information relating to clinical studies and their outcomes. Other states and cities require identification or licensing of sales representatives. In addition, ~~California, Connecticut, Nevada, and Massachusetts~~several states require pharmaceutical companies to implement compliance programs or marketing codes of conduct.

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Similar restrictions are imposed on the promotion and marketing of medicinal products in the EU member states and other countries, including restrictions on interactions with healthcare professionals and requirements for public disclosure of payments made to physicians. Laws (including those governing promotion, marketing and anti-kickback provisions), industry regulations and professional codes of conduct often are strictly enforced. Even in those countries where we may decide not to directly promote or market our products, inappropriate activity by our international distribution partners could have implications for us.

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Ensuring that our business arrangements and interactions with healthcare professionals, ~~third‑party~~third-party payors, patients and others comply with applicable healthcare laws and regulations will require substantial resources. Various state and federal regulatory and enforcement agencies continue actively to investigate violations of health care laws and regulations, and the United States Congress continues to strengthen the arsenal of enforcement tools. The BBA of 2018 increased the criminal and civil penalties that can be imposed for violating certain federal health care laws, including the Anti-Kickback Statute.

It is possible that governmental authorities will conclude that our business practices do not comply with current or future statutes, regulations or case law involving applicable fraud and abuse, privacy, or other healthcare laws and regulations. If our operations, including our engagements with healthcare professionals, researchers and patients, or our disease awareness and/or patient identification initiatives including genetic testing programs, or anticipated activities to be conducted by our ~~sales and marketing team,~~field teams, were found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to costly investigations, significant civil, criminal and administrative monetary penalties, imprisonment, damages, fines, ~~and~~disgorgement, exclusion from government funded healthcare programs, such as Medicare and Medicaid, contractual damages, diminished profits and future earnings, and the curtailment or restructuring of our ~~operation,~~operations, any of which could substantially disrupt our ~~operations.~~operations or financial results. Although compliance programs can mitigate the risk of investigation and prosecution for violations of these laws, the risks cannot be entirely eliminated. Any action against us for violation of these laws or regulations, even if we successfully defend against it, could cause us to incur significant legal expenses and generate negative publicity, which could harm our financial condition and divert our management’s attention from the operation of our business.

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Our employees may engage in misconduct or other improper activities, including violating applicable regulatory standards and requirements or engaging in insider trading, which could significantly harm our business.

We are exposed to the risk of employee fraud or other misconduct. Misconduct by employees could include intentional failures to comply with the regulations of the FDA and applicable ~~non‑U.S.~~non-U.S. regulators, provide accurate information to the FDA and applicable ~~non‑U.S.~~non-U.S. regulators, comply with healthcare fraud and abuse laws and regulations in the United States and abroad, report financial information or data accurately or disclose unauthorized activities to us. In particular, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, misconduct, kickbacks, ~~self‑dealing~~self-dealing and other abusive practices. These laws and regulations restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements. Employee misconduct could also involve the improper use of, including trading on, information obtained in the course of clinical trials, which could result in regulatory sanctions and serious harm to our reputation. It is not always possible to identify and deter employee misconduct, and any precautions we take to detect and prevent this activity may be ineffective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with these laws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of significant fines or other sanctions. Some of these laws and related risks are described under the risk factor “We may be subject to federal and state healthcare laws and regulations. If we are unable to comply or have not fully complied with such laws and regulations, we could face criminal sanctions, damages, substantial civil penalties, reputational harm and diminished profits and future earnings” of this Quarterly Report.

Our failure to comply with data protection laws and regulations could lead to government enforcement actions and significant penalties against us, and adversely impact our operating results.

We are subject to U.S. data protection laws and regulations, ~~(i.e.,~~for example, laws and regulations that address privacy and data ~~security)~~security, at both the federal and state levels. The legislative and regulatory landscape for data protection continues to evolve, and in recent years there has been an increasing focus on privacy and data security issues. Numerous federal and state laws, including state data breach notification laws, state health information privacy laws, state genetic privacy laws, and federal and state consumer protection laws, ~~(e.g.,~~including, for example, Section 5 of the ~~FTC Act),~~Federal Trade Commission Act of 1914, as amended, and the CCPA, govern the collection, use, and disclosure and protection of ~~health‑related~~certain health-related and other personal information. Failure to comply with data protection laws and regulations could result in government enforcement actions and create liability for us, which could include civil and/or criminal penalties, private litigation and/or adverse publicity that could negatively affect our operating results and business. In addition, we may obtain health information from third parties, such as research institutions with which we collaborate, that are subject to privacy and security requirements under HIPAA. Although we are not directly subject to HIPAA, other than potentially with respect to providing certain employee benefits, we could be subject to criminal penalties if we knowingly obtain or disclose individually identifiable health information maintained by a HIPAA covered entity in a manner that is not authorized or permitted by HIPAA. In addition, state laws govern the privacy and security of health, research and genetic information in specified circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts. Some of our research activities involve minors, which may be subject to additional laws and can require specialized consent processes, privacy protections, and compliance procedures.

The EU, ~~member states,~~United Kingdom, Switzerland and other countries have also adopted data protection laws and regulations, which impose significant compliance obligations. In the ~~European Union,~~EU, the collection and use of personal data, including health and genetic data, is governed by the provisions of the EUGeneral Data Protection ~~Directive.~~Regulation, or GDPR. The ~~European Union~~GDPR became effective on May 25, 2018, repealing the Data Protection Directive and increasing our responsibility and liability in relation to the processing of personal data of EU subjects. Fines for certain breaches of the GDPR are significant, up to the greater of 20 million Euros or 4 % of total global annual turnover. In addition to the foregoing, a breach of the GDPR could result in regulatory investigations, reputational damage, orders to cease/change our processing of our data, enforcement notices, and/or assessment notices (for a compulsory audit). We may also face civil claims including representative actions and other class action type litigation (where individuals have suffered harm), potentially amounting to significant compensation or damages liabilities, as well as associated costs, diversion of internal resources, and reputational harm. Additionally, from 1 January 2021, we are subject to the GDPR and also the United Kingdom GDPR,

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which, together with the amended United Kingdom Data Protection Act 2018, retains the GDPR in United Kingdom national law following Brexit. The United Kingdom GDPR mirrors the fines under the GDPR, e.g. fines up to the greater of €20 million (£17.5 million) or 4% of global turnover. The relationship between the United Kingdom and the European Union in relation to certain aspects of data protection law remains unclear, and it is unclear how United Kingdom data protection laws and regulations will develop in the medium to longer term. These changes will lead to additional costs and increase our overall risk exposure.

The GDPR, together with the national ~~implementing~~ legislation of the EU, EEA member states and the United Kingdom governing the processing of personal data, impose strict obligations and restrictions on the ability to collect, analyze and transfer personal data, including health data from clinical trials and ~~adverse event~~AE reporting. In

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particular, these obligations ~~and~~include restrictions ~~concern~~concerning the consent of the individuals to whom the personal data relates, the information provided to the individuals, ~~notification~~the transfer of personal data ~~processing obligations to~~out of the ~~competent national data protection authorities~~EU, the EEA and the United Kingdom, security breach notifications, security and confidentiality of the personal ~~data.~~data, and imposition of substantial potential fines for breaches of the data protection obligations. Data protection authorities from the different EU and EEA member states may interpret the ~~EU Data Protection Directive~~GDPR and national laws differently and impose additional requirements, which add to the complexity of processing personal data in the ~~European Union.~~

EU and the EEA. Guidance on implementation and compliance practices are often updated or otherwise revised. ~~For example,~~

With respect to the transfer of personal data out of the EU ~~Data Protection Directive prohibits~~and the United Kingdom, the GDPR and the United Kingdom GDPR provides that the transfer of personal data to countries ~~outside of the European Union, including the United States,~~ that are not considered by the European Commission to provide an adequate level of data ~~protection.~~

~~The judgment by~~protection, including the United States, is permitted only on the basis of complying with specific legal steps, a number of which are subject to legal challenges. Most recently, on July 16, 2020, the Court of Justice of the European Union (“CJEU”) invalidated the EU-US Privacy Shield Framework (“Privacy Shield”) under which personal data could be transferred from the EEA to US entities who had self-certified under the Privacy Shield scheme. These recent developments may require us to review and amend the legal mechanisms by which we make and/or receive personal data transfers to/in ~~Case C‑362/14 Maximillian Schrems v. Data Protection Commissioner,~~ the U.S. As supervisory authorities issue further guidance on personal data export mechanisms, including circumstances where the standard contractual clauses cannot be used, and/or start taking enforcement action, we could suffer additional costs, complaints and/or regulatory investigations or fines, and/or if we are otherwise unable to transfer personal data between and among countries and regions in which we operate, it could affect the ~~Schrems case, held~~manner in which we provide our services, the geographical location or segregation of our relevant systems and operations, and could adversely affect our financial results. In addition, the United Kingdom’s withdrawal from the European Union means that the ~~Safe Harbor Framework, which was relied upon by many~~ United ~~States entities as~~Kingdom will become a ~~basis~~“third country” for ~~transfer~~the purposes of ~~personal~~ data transfers from the European Union to the United ~~States, was invalid. United States entities therefore, had only~~Kingdom following the ~~possibility~~expiration of the four to ~~rely on the alternate procedures for such~~six-month personal data transfer ~~provided~~grace period (from 1 January 2021) set out in the EU ~~Data Protection Directive.~~

~~On February 29, 2016, however, the European Commission announced an agreement with~~and United Kingdom Trade and Cooperation Agreement, unless a relevant adequacy decision is adopted in favor of the United ~~States Department of Commerce, or~~Kingdom (which would allow data transfers without additional measures). These changes may require us to find alternative solutions for the DOC, to replace the invalidated Safe Harbor framework with a new “Privacy Shield”. On July 12, 2016, the European Commission adopted a decision on the adequacy of the protection provided by the Privacy Shield. The Privacy Shield is intended to address the requirements set out by the Court of Justice of the European Union in the Schrems case. The Privacy Shield imposes more stringent obligations on companies, provides stronger monitoring and enforcement by the DOC and the Federal Trade Commission, and makes commitments on the part of public authorities regarding access to information. United States entities have been able to certify to the DOC their compliance with the privacy principles of the Privacy Shield since August 1, 2016 and rely on the Privacy Shield certification tocompliant transfer of personal data ~~from the European Union to~~into the United ~~States.~~Kingdom.

In September 2016, the Irish privacy advocacy group Digital Rights Ireland brought an action for annulment of the European Commission decision on the adequacy of the Privacy Shield before the Court of Justice of the EU, Case T‑670/16. In October 2016, a further action for annulment was brought by three French digital rights advocacy group, La Quadrature du Net, French Data Network and the Fédération FDN, Case T‑738/16. Both cases are currently pending before the European Court of Justice. If the Court of Justice of the European Union invalidates the Privacy Shield, it will no longer be possible to rely on the Privacy Shield certification to transfer personal data from the European Union to entities in the United States. Adherence to the Privacy Shield is not, however, mandatory. Entities based in the United States are permitted to rely either on their adherence to the Privacy Shield or on the other authorized means and procedures to transfer personal data provided by the EU Data Protection Directive.

In addition, the EU Data Protection Regulation entered into force on May 24, 2016 and will apply from May 25, 2018. The EU Data Protection Regulation will introduce new data protection requirements in the European Union and substantial fines for breaches of the data protection rules. The EU Data Protection Regulation will increase our responsibility and liability in relation to personal data that we process, and we may be required to put in place additional mechanisms to ensure compliance with the new data protection rules.

Our failure to comply with these laws, or changes in the way in which these laws are implemented, could lead to government enforcement actions and significant penalties against us, and adversely impact our operating results. In particular, our failure to comply with our obligations under the GDPR, including any failure to adopt measures to ensure that we can continue to conduct the data processing activities that we initiated in the EU before the GDPR entered into application could adversely impact our ability to use the data generated in our studies.

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Our future growth depends, in part, on our ability to penetrate foreign markets, where we will be subject to additional regulatory burdens and other risks and uncertainties.

Our future profitability will depend, in part, on our ability to commercialize setmelanotide in foreign markets for which we intend to rely on collaborations with third parties. If we commercialize setmelanotide in foreign markets, we will be subject to additional risks and uncertainties, including:

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our customers’ ability to obtain reimbursement for setmelanotide in foreign markets;

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our inability to directly control commercial activities because we are relying on third parties;

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the burden of complying with complex and changing foreign regulatory, tax, accounting and legal requirements;

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different medical practices and customs in foreign countries affecting acceptance in the marketplace;

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import or export licensing requirements;

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longer accounts receivable collection times;

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longer lead times for shipping;

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language barriers for technical training;

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reduced protection of intellectual property rights in some foreign countries;

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foreign currency exchange rate fluctuations; and

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the interpretation of contractual provisions governed by foreign laws in the event of a contract dispute.

Foreign sales of setmelanotide could also be adversely affected by the imposition of governmental controls, political and economic instability, trade restrictions and changes in tariffs.

Laws and regulations governing any international operations we may have in the future may preclude us from developing, manufacturing and selling setmelanotide outside of the United States and require us to develop and implement costly compliance programs.

If we expand our operations outside of the United States, we must dedicate additional resources to comply with numerous laws and regulations in each jurisdiction in which we plan to operate. The Foreign Corrupt Practices Act of 1977, or the FCPA, prohibits any U.S. individual or business from paying, offering, authorizing payment or offering anything of value, directly or indirectly, to any foreign official, political party or candidate for the purpose of influencing any act or decision of such third party in order to assist the individual or business in obtaining or retaining business. The FCPA also obligates companies whose securities are listed in the United States to comply with certain accounting provisions requiring the company to maintain books and records that accurately and fairly reflect all transactions of the company, including international subsidiaries, and to devise and maintain an adequate system of internal accounting controls for international operations.

Compliance with the FCPA is expensive and difficult, particularly in countries in which corruption is a recognized problem. In addition, the FCPA presents particular challenges in the pharmaceutical industry, because, in many countries, hospitals are operated by the government, and doctors and other hospital employees are considered foreign officials. Certain payments to hospitals in connection with clinical trials and other work have been deemed to be improper payments to government officials and have led to FCPA enforcement actions.

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Various laws, regulations and executive orders also restrict the use and dissemination outside of the United States, or the sharing with certain ~~non‑U.S.~~non-U.S. nationals, of information classified for national security purposes, as well as certain products and technical data relating to those products. If we expand our presence outside of the United States, it will require us to dedicate additional resources to comply with these laws, and these laws may preclude us from developing, manufacturing or selling certain product candidates and products outside of the United States, which could limit our growth potential and increase our development costs.

The failure to comply with laws governing international business practices may result in substantial civil and criminal penalties and suspension or debarment from government contracting. The Securities and Exchange Commission, or SEC, also may suspend or bar issuers from trading securities on U.S. exchanges for violations of the FCPA’s accounting provisions.

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The results of the United Kingdom’s referendum on withdrawal from the ~~European Union~~EU may have a negative effect on global economic conditions, financial markets and our business.

~~On March 29, 2017,~~Following a national referendum and enactment of legislation by the ~~Government~~government of the United Kingdom, ~~initiated the formal procedure of withdrawal from the European Union. The procedure involves a two‑year negotiation period in which~~ the United Kingdom formally withdrew from the EU on January 31, 2020 (commonly referred to as “Brexit”) and entered into a transition period which ended on December 31, 2020. Since the ~~European Union must conclude an agreement setting out the terms~~expiry of the ~~United Kingdom’s withdrawal and the arrangements for~~transition period, the United ~~Kingdom’s future relationship with~~Kingdom operates under a distinct regulatory regime. EU pharmaceutical laws only apply to the ~~European Union. This negotiation period could~~United Kingdom in respect of Northern Ireland (as laid out in the Protocol on Ireland and Northern Ireland). Since January 1, 2021, the EU laws which have been transposed into UK law through secondary legislation continue to be ~~extended by~~applicable as “retained EU law”. As there is no general power to amend these regulations, the UK government has introduced a ~~unanimous decision~~new Medicines and Medical Devices Bill which seeks to address regulatory gaps through implementing regulations and delegated powers covering the fields of human medicines, clinical trials of human medicines, veterinary medicines and medical devices. The purpose of the ~~European Council,~~bill is to enable the existing UK regulatory frameworks to be updated. Although regulatory authorities in ~~agreement~~the UK have indicated in the bill that new UK rules will closely align with ~~the United Kingdom.~~

~~The referendum has created significant~~EU laws, detailed proposals are yet to be published. Significant political and economic uncertainty ~~concerning~~therefore remains about how much the ~~future~~ relationship between the United Kingdom and ~~the European Union. This includes the laws and regulations that~~EU will ~~apply~~differ as ~~the United Kingdom determines which European Union laws to replace or replicate in the event of~~ a ~~withdrawal. From a regulatory perspective, the United Kingdom’s withdrawal could~~ result in significant complexity and risks. A basic requirement related to the grant of a marketing authorization for a medicinal product in the European Union is the requirement that the applicant is established in the European Union. Following withdrawal of the United Kingdom from the European Union, marketing authorizations previously granted to applicants established in the United Kingdom may no longer be valid. Moreover, depending upon the exact terms of the United Kingdom’s withdrawal, there is an arguable risk that the scope of a marketing authorization for a medicinal product granted by the European Commission pursuant to the centralized procedure would not, in the future, include the United Kingdom. In these circumstances, an authorization granted by the United Kingdom’s competent authorities would always be required to place medicinal products on the United Kingdom market.

In addition, the laws and regulations that will apply after the United Kingdom withdraws from the European Union may have implications for manufacturing sites that hold certification issued by the United Kingdom competent authorities. Our capability to rely on these manufacturing sites for products intended for the European Union market would also depend upon the exact terms of the United Kingdom’s withdrawal.

On December 24, 2020, the United Kingdom and the EU announced that they had agreed to the terms of their future trading relationship in the EU—United Kingdom Trade and Cooperation Agreement (“TCA”), which has been provisionally applicable since January 1, 2021, but which awaits the final agreement of the remaining 27 EU member states. While agreement on the terms of the TCA has avoided a “ no deal” Brexit scenario, and provides in principle for quota- and tariff-free trading of goods, it is nevertheless expected that the TCA will result in the creation of non-tariff barriers (such as increased shipping and regulatory costs and complexities) to the trade in goods between the United Kingdom and the EU. Further, the TCA does not provide for the continued free movement of services between the United Kingdom and the EU and imposes additional restrictions on the free movement of people between the United Kingdom and the EU. The TCA includes provisions affecting pharmaceutical companies such as customs and tariffs in relation to healthcare products and provides for the mutual recognition of Good Manufacturing Practice (GMP) inspections of manufacturing facilities for medicinal products and GMP documents issued. It is important to note however that significant regulatory gaps still exist and the TCA does not contain wholesale mutual recognition of United Kingdom and EU pharmaceutical regulations and product standards, for example in relation to batch testing and pharmacovigilance, which remain subject to further bilateral discussions.

The United ~~Kingdom referendum has also given rise to calls for the governments of other EU member states to consider~~Kingdom’s withdrawal from the ~~European Union. These developments, or~~EU and the ~~perception that they could occur, have~~associated uncertainty has had and may continue to have a ~~material~~significant adverse effect on global economic conditions and the stability of global financial ~~markets. They may~~markets, and could significantly reduce global market liquidity and restrict the ability of key market participants to operate in certain financial markets. Asset valuations, currency exchange rates and credit ratings may be especially subject to increased market volatility. Any of these factors could have a significant adverse effect on our business, financial condition, results of operations and prospects.

~~The efforts~~Further, the United Kingdom’s withdrawal from the EU has resulted in the relocation of the ~~Trump administration~~EMA from the United Kingdom to ~~pursue regulatory reform~~the Netherlands. This relocation has caused, and may ~~limit the FDA’s ability~~continue to ~~engage in oversight and implementation activities~~cause, disruption in the ~~normal course,~~administrative and ~~that could negatively impact our business.~~

medical scientific links between the EMA and the United Kingdom Medicines and Healthcare products Regulatory Agency, including delays in granting clinical trial authorization or marketing authorization, disruption of importation and export of active substance and other components of new drug formulations, and disruption of the supply chain for clinical trial product and final authorized formulations. The ~~Trump administration has taken several executive actions, including~~cumulative effects of the ~~issuance~~disruption to the regulatory framework may add considerably to the development lead time to marketing authorization and commercialization of ~~a number of executive orders, that could impose significant burdens on,~~ products in the EU and/or ~~otherwise materially delay,~~ the FDA’s ability to engage in routine regulatory and oversight activities such as implementing statutes through rulemaking, issuance of guidance, and review and approval of marketing applications. On January 30, 2017, President Trump issued an executive order, applicable to all executive agencies, including the FDA, that requires that for each notice of proposed rulemaking or final regulation to be issued in fiscal year 2017, the agency shall identify at least two existing regulations to be repealed, unless prohibited by law. These requirements are referred to as the “two‑for‑one” provisions. This executive order includes a budget neutralityUnited Kingdom.

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provision that requires the total incremental cost of all new regulations in the 2017 fiscal year, including repealed regulations, to be no greater than zero, except in limited circumstances. For fiscal years 2018 and beyond, the executive order requires agencies to identify regulations to offset any incremental cost of a new regulation. In interim guidance issued by the Office of Information and Regulatory Affairs within the Office of Management and Budget, or OMB, on February 2, 2017, the administration indicates that the “two‑for‑one” provisions may apply not only to agency regulations, but also to significant agency guidance documents. It is difficult to predict how these requirements will be implemented, and the extent to which they will impact the FDA’s ability to exercise its regulatory authority. If these executive actions impose constraints on FDA’s ability to engage in oversight and implementation activities in the normal course, our business may be negatively impacted.

Risks Related to Employee Matters and Managing Growth

Our future success depends on our ability to retain our key employees and consultants, and to attract, retain and motivate qualified personnel.

We are highly dependent on ~~Keith M. Gottesdiener, M.D.,~~ our Chief Executive Officer and President, Hunter Smith, our Chief Financial Officer and Treasurer, Nithya Desikan, our Chief Commercial Officer, Lex H.T. Van der Ploeg, Ph.D., our Chief Scientific Officer, and Fred T. Fiedorek, M.D., our Chief Medical Officer.executive leadership team. We have employment agreements with these individuals ~~that became effective upon consummation of our IPO,~~ but any individual may terminate his or her employment with us at any time. The loss of their services might impede the achievement of our research, development and commercialization objectives. We also do not have any ~~key‑person~~key-person life insurance on any of these key employees. We rely on consultants and advisors, including scientific and clinical advisors, to assist us in formulating our development and commercialization strategy. Our consultants and advisors may be employed by employers other than us and may have commitments under consulting or advisory contracts with other entities that may limit their availability to us and may not be subject to ~~non‑compete~~non-compete agreements. Recruiting and retaining qualified scientific personnel and sales and marketing personnel will also be critical to our success. We may not be able to attract and retain these personnel on acceptable terms given the competition among numerous pharmaceutical and biotechnology companies for similar personnel. We also experience competition for the hiring of scientific personnel from universities and research institutions. Failure to succeed in clinical trials may make it more challenging to recruit and retain qualified scientific personnel.

We will need to develop and expand our company, and we may encounter difficulties in managing this development and expansion, which could disrupt our operations.

~~As a public company, we~~We expect to increase our number of employees and the scope of our operations. In particular, we will need to transition from a research and development company to a commercial company. To manage our anticipated development and expansion, we must continue to implement and improve our managerial, operational and financial systems, expand our facilities and continue to recruit and train additional qualified personnel. Also, our management may need to divert a disproportionate amount of its attention away from their ~~day‑to‑day~~day-to-day activities and devote a substantial amount of time to managing these development activities. Due to our limited resources, we may not be able to effectively manage the expansion of our operations or recruit and train additional qualified personnel. This may result in weaknesses in our infrastructure, and give rise to operational mistakes, loss of business and commercial opportunities, loss of employees and reduced productivity among remaining employees. ~~The physical expansion of our operations may lead to significant costs and may divert financial resources from other projects, such as the development of setmelanotide.~~ If our management is unable to effectively manage our expected development and expansion, our expenses may increase more than expected, our ability to generate or increase our revenue could be reduced and we may not be able to implement our business strategy.

The physical expansion of our operations may lead to significant costs and may divert financial resources from other projects, such as the development of setmelanotide. Many of our suppliers and collaborative and clinical trial relationships are located outside the United States, and we may in the future seek to hire employees located outside of the United States. Accordingly, our business may become subject to economic, political, regulatory and other risks associated with international operations, such as compliance with tax, employment, immigration and labor laws for employees living or traveling abroad, workforce uncertainty in countries where labor unrest is more common than in the United States, as well as difficulties associated with staffing and managing international operations, including differing labor relations. Any of these factors could materially affect our business, financial condition and results of operations. Our future financial performance and our ability to commercialize setmelanotide, if approved, and compete effectively will depend, in part, on our ability to effectively manage the future development and expansion of our company.

~~In order to satisfy our obligations as a public company, we will need to hire additional qualified accounting and financial personnel with appropriate public company experience.~~

As a newly public company, we must establish and maintain effective disclosure and financial controls. We will need to continue to hire additional accounting and financial personnel with appropriate public company experience and

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technical accounting knowledge, and it may be difficult to recruit and retain such personnel. Even if we are able to hire appropriate personnel, our existing operating expenses and operations will be impacted by the direct costs of their employment and the indirect consequences related to the diversion of management resources from product development efforts.

Our internal computer systems, or those of our ~~third‑party~~third-party CROs, CMOs or other contractors or consultants, may fail or suffer security breaches, which could result in a material disruption of setmelanotide development ~~programs.~~programs, regulatory investigations, enforcement actions and lawsuits.

~~Our~~In the ordinary course of our business, we collect and store sensitive data, including intellectual property, our proprietary business information and that of our suppliers, as well as personally identifiable information of employees. Similarly, our third-party CROs, CMOs and other contractors and consultants possess certain of our sensitive data. The secure maintenance of this information is material to our operations and business strategy. Despite the implementation of security measures, our internal computer systems and those of our ~~third‑party~~third-party CROs, CMOs and other contractors and consultants are vulnerable to attacks by hackers, damage from computer viruses, unauthorized access, breach due to

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employee error, malfeasance or other disruptions, natural disasters, terrorism ~~war~~ and telecommunication and electrical failures. Any such attack, incident or breach could compromise our networks and the information stored there could be accessed, publicly disclosed, lost, corrupted or stolen. Further, attacks upon information technology systems are increasing in their frequency, levels of persistence, sophistication and intensity, and are being conducted by sophisticated and organized groups and individuals with a wide range of motives and expertise. As a result of the COVID-19 pandemic, we may also face increased cybersecurity risks due to our reliance on internet technology and the number of our employees who are working remotely, which may create additional opportunities for cybercriminals to exploit vulnerabilities. Furthermore, because the techniques used to obtain unauthorized access to, or to sabotage, systems change frequently and often are not recognized until launched against a target, we may be unable to anticipate these techniques or implement adequate preventative measures. We may also experience security breaches that may remain undetected for an extended period. The legislative and regulatory landscape for privacy and data protection continues to evolve, and there has been an increasing amount of focus on privacy and data protection issues with the potential to affect our business, including recently enacted laws in a majority of states requiring security breach notification, some also require implementation of reasonable security measures and provide a private right of action in the event of a breach. Costs of breach response, mitigation, investigation, remediation, notice and ongoing assessments can be considerable. Thus, any access, disclosure, damage or other loss of information, including our data being breached at our partners or third-party providers, could result in legal claims or proceedings and liability under state, federal and international privacy laws, disruption of our operations, and damage to our reputation, which could adversely affect our business.

If such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our programs. For example, the loss of clinical trial data for setmelanotide or other product candidates could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. To the extent that any disruption or security breach results in a loss of or damage to our data or applications or other data or applications relating to our technology or product ~~candidate,~~candidates, or inappropriate disclosure of confidential or proprietary information, we could incur liabilities and the further development of setmelanotide and our product candidates could be delayed.

~~We may acquire businesses or products, form strategic alliances or create joint ventures in the future, and we may not realize their benefits.~~

We may acquire additional businesses or products, form strategic alliances or create joint ventures with third parties that we believe will complement or augment our existing business. If we acquire businesses with promising markets or technologies, we may not be able to realize the benefit of acquiring such businesses if we are unable to successfully integrate them with our existing operations and company culture. We may encounter numerous difficulties in developing, manufacturing and marketing any new products resulting from a strategic alliance, joint venture or acquisition that delay or prevent us from realizing their expected benefits or enhancing our business. We cannot assure you that, following any such acquisition, we will achieve the expected synergies to justify the transaction.

Risks Related to Our Common Stock

Our ~~principal stockholders~~directors and ~~management~~executive officers and their affiliated entities own a significant percentage of our stock and, if they choose to act together, will be able to exert significant ~~control~~influence over matters subject to stockholder approval.

~~Based on the number of shares outstanding as of September 30, 2017, after the closing our IPO in October 2017, our~~Our executive officers and directors ~~holders of 5% or more of our capital stock~~ and their respective affiliates, ~~beneficially owned~~in the aggregate, hold shares representing approximately ~~64.1%~~11.9% of our outstanding voting ~~stock. These~~stock as of March 31, 2021. As a result, if these stockholders ~~will have the ability~~were to ~~influence us through this ownership position. These stockholders may~~choose to act together, they would be able to ~~determine~~significantly influence all matters ~~requiring stockholder approval.~~submitted to our stockholders for approval, as well as our management and affairs. For example, these stockholders ~~may be able to control~~could significantly influence elections of directors, any amendments of our organizational documents, or approval of any merger, sale of assets, or other major corporate transaction. This may prevent or discourage unsolicited acquisition proposals or offers for our common stock that you may feel are in your best interest as one of our stockholders.

~~Anti‑takeover~~Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of us, even one that may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current management.

We are a Delaware corporation. Provisions in our amended and restated certificate of incorporation and amended and restated bylaws may delay or prevent an acquisition of us or a change in our management. In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which limits the ability of stockholders owning in excess of 15% of our outstanding voting stock to merge or combine with us. Although we believe these provisions collectively will provide for an opportunity to obtain greater value for stockholders by requiring potential acquirers to negotiate with our board of directors, they would apply even if an offer rejected by our board were considered beneficial by some stockholders. In addition, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors, which is responsible for appointing the members of our

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management. Any provision in our amended and restated certificate of incorporation and amended and restated bylaws or Delaware law that has the effect of delaying or deterring a change in control could limit the opportunity for our stockholders

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to receive a premium for their shares of our common stock, and could also affect the price that some investors are willing to pay for our common stock.

~~An active market for our common stock may not be maintained.~~

Prior to our IPO, there had been no public market for shares of our common stock. Our stock only recently began trading on The NASDAQ Global Market, but we can provide no assurance that we will be able to maintain an active trading market on The NASDAQ Global Market or any other exchange in the future. If an active market for our common stock does not develop or is not maintained, it may be difficult for our stockholders to sell shares without depressing the market price for the shares or at all. An inactive market may also impair our ability to raise capital by selling shares and may impair our ability to acquire other businesses, applications or technologies using our shares as consideration.

~~If securities or industry analysts do not publish research or reports or publish unfavorable research or reports about our business, our stock price and trading volume could decline.~~

The trading market for our common stock will depend in part on the research and reports that securities or industry analysts publish about us, our business, our market or our competitors. We do not control these analysts. We currently have very limited research coverage by securities and industry analysts. If no additional securities or industry analysts commence coverage of our company, the trading price for our stock would be negatively impacted. If one or more of the analysts who covers us downgrades our stock, our stock price would likely decline. If one or more of these analysts issues unfavorable commentary or ceases to cover us or fails to regularly publish reports on us, interest in our stock could decrease, which could cause our stock price or trading volume to decline.

~~Unfavorable global economic conditions could adversely affect our business, financial condition or results of operations.~~

Our results of operations could be adversely affected by general conditions in the global economy and in the global financial markets. The global financial crisis caused extreme volatility and disruptions in the capital and credit markets. A severe or prolonged economic downturn, such as the global financial crisis, could result in a variety of risks to our business, including weakened demand for setmelanotide and our ability to raise additional capital when needed on acceptable terms, if at all. A weak or declining economy could also strain our suppliers, possibly resulting in supply disruption, or cause our customers to delay making payments for our services. Any of the foregoing could harm our business and we cannot anticipate all of the ways in which the current economic climate and financial market conditions could adversely impact our business.

Market volatility may affect our stock price and the value of your investment.

The market price for our common stock ~~is likely to be~~has been volatile and may continue to fluctuate significantly in response to a number of factors, most of which we cannot control, including, among others:

●

plans for, progress of, or results from preclinical studies and clinical trials of setmelanotide;

●

the failure of the FDA to approve IMCIVREE for additional indications or EMA to approve setmelanotide;

●

announcements of new products, technologies, commercial relationships, acquisitions or other events by us or our competitors;

●

the success or failure of other weight loss therapies and companies targeting rare diseases and orphan drug treatment;

●

regulatory or legal developments in the United States and other countries;

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●

failure of setmelanotide, if approved, to achieve commercial success;

●

fluctuations in stock market prices and trading volumes of similar companies;

●

general market conditions and overall fluctuations in U.S. equity markets;

●

variations in our quarterly operating results;

●

changes in our financial guidance or securities analysts’ estimates of our financial performance;

●

changes in accounting principles;

●

our ability to raise additional capital and the terms on which we can raise it;

●

sales of large blocks of our common stock, including sales by our executive officers, directors and significant stockholders;

●

additions or departures of key personnel;

●

discussion of us or our stock price by the press and by online investor communities; and

●

other risks and uncertainties described in these risk factors.

Our quarterly operating results may fluctuate significantly.

We expect our operating results to be subject to quarterly fluctuations. Our net loss and other operating results will be affected by numerous factors, including:

●

variations in the level of expenses related to our development programs;

●

addition or termination of clinical trials;

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●

any intellectual property infringement lawsuit in which we may become involved;

●

regulatory developments affecting setmelanotide;

●

our execution of any collaborative, licensing or similar arrangements, and the timing of payments we may make or receive under these arrangements;

●

the achievement and timing of milestone payments under our existing collaboration and license agreements; and

●

if setmelanotide receives regulatory approval, the level of underlying demand for that product and customers’ buying patterns.

If our quarterly operating results fall below the expectations of investors or securities analysts, the price of our common stock could decline substantially. Furthermore, any quarterly fluctuations in our operating results may, in turn, cause the price of our stock to fluctuate substantially.

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~~We will have broad discretion in how we use the proceeds from our IPO. We may not use these proceeds effectively, which could affect our results of operations and cause our stock price to decline.~~

We will have considerable discretion in the application of the net proceeds from our IPO. We intend to use the net proceeds to fund development and manufacturing of setmelanotide through completion of our Phase 3 clinical trials and subsequent NDA submissions with the FDA for the treatment of POMC deficiency obesity and LepR deficiency obesity, the development of setmelanotide through our Phase 2 proof of concept clinical trials for Bardet‑Biedl syndrome, Alström syndrome, POMC heterozygous deficiency obesity and POMC epigenetic disorders, as well as the initiation of our Phase 3 clinical trials for Bardet‑Biedl syndrome, the preparation for commercialization of setmelanotide, initiatives to expand the diagnosis of genetic obesity, including research and scientific exchange related to our ongoing genotyping and genetic epidemiology studies and for working capital and general administrative expenses, additional research and development expenses, and other general corporate purposes. As a result, investors will be relying upon management’s judgment with only limited information about our specific intentions for the use of the net proceeds. We may use the net proceeds for purposes that do not yield a significant return or any return at all for our stockholders. In addition, pending their use, we may invest the net proceeds in a manner that does not produce income or that loses value.

Our ability to use certain net operating loss carryovers and other tax attributes may be limited.

~~We have incurred substantial losses during our history and we do not expect to become profitable in the near future and may never achieve profitability.~~ Under the Code, a corporation is generally allowed a deduction for net operating losses, or NOLs, carried over from a prior taxable ~~year. Under that provision, we~~year, and can ~~carry forward certain taxable losses of our subsidiaries~~use such NOLs to offset future taxable income, if any, until such losses are used or, for NOLs arising in taxable years ending on or before December 31, 2017, until such NOLs expire. ~~The same is true of other~~Other unused tax attributes, such as research tax ~~credits.~~ credits may also be carried forward to offset future taxable income, if any, until such attributes are used or expire.As of December 31, ~~2016,~~2020, we had approximately ~~$46.9~~$382.3 million and ~~$24.4~~$351.2 million of unused federal and state NOL carryforwards, respectively, and approximately $8.1 million and $2.8 million of unused federal and state carryforwards of ~~NOLs, respectively, and approximately $1.0 and $0.4 million of unused federal and state carryforwards of~~research tax credits, respectively. Of the federal NOL carryforwards at December 31, 2020, $309.1 million can be carried forward indefinitely, while $73.2 million will begin to expire in 2033. Additionally, as of December 31, 2020, we had federal orphan drug credits related to qualifying research of $10.1 million.

If a corporation undergoes an “ownership change,” very generally defined as a greater than 50% change by value in its equity ownership by certain shareholders or groups of shareholders over a ~~three‑year~~rolling three-year period, Sections 382 and 383 of the Code limit the corporation’s ability to use carryovers of its ~~pre‑change~~pre-change NOLs, credits and certain other tax attributes to reduce its tax liability for periods after the ownership change. Our issuance of common stock pursuant to ~~our IPO~~prior public offerings may ~~result~~have resulted in a limitation under Code Sections 382 and 383, either separately or in combination with certain prior or subsequent shifts in the ownership of our common stock. Future changes in our stock ownership, some of which are outside of our control, could also result in an ownership change under Sections 382 and 383 of the Code. In addition, for taxable years beginning after December 31, 2020, utilization of federal NOLs generated in tax years beginning after December 31, 2017 are limited to a maximum of 80% of the taxable income for such year, after taking into account utilization of NOLs generated in years beginning before January 1, 2018 and determined without regard to such NOL deduction. Further regulatory changes could also limited our ability to utilize our NOLs. As a result, our ability to use carryovers of ~~pre‑change~~ NOLs and credits to reduce our future U.S. federal income tax liability may be subject to limitations. This could result in increased U.S. federal income tax liability for us if we generate taxable income in a future period. Limitations on the use of NOLs and other tax attributes could also increase our state tax liability. Any such limitation could have a material adverse effect on our results of operations in future years. We have not completed a study to assess whether an ownership change for purposes of Section 382 or 383 has occurred, or whether there have been multiple ownership changes since our inception, due to the significant costs and complexities associated with such study.

The use of our tax attributes will also be limited to the extent that we do not generate positive taxable income in future tax periods. We do not expect to generate positive taxable income in the near future and we may never achieve tax profitability.

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Substantial future sales or perceived potential sales of our common stock in the public market could cause the price of our common stock to decline significantly.

Sales of our common stock in the public market, or the perception that these sales could occur, could cause the market price of our common stock to decline significantly. As of March 31, 2021, we had 50,201,758 shares of common stock outstanding.

The holders of an aggregate of approximately 5.9 million shares of our common stock, or approximately 11.8% of our total outstanding common stock as of March 31, 2021, are entitled to rights with respect to the registration of their shares under the Securities Act, subject to specified conditions, until such shares can otherwise be sold without restriction under Rule 144 or until the rights terminate pursuant to the terms of the investors’ rights agreement between us and such holders. We have also registered and intend to continue to register all shares of common stock that we may issue under our equity compensation plans. Once we register these shares under the Securities Act, the shares become freely tradable without restriction under the Securities Act, except for shares purchased by affiliates. Any sales of securities by these stockholders could have a material adverse effect on the trading price of our common stock.

In addition, we, our executive officers, have agreed that, subject to certain exceptions, during the period ending 90 days after the date of the prospectus supplement filed in connection with our February 2021 public offering, we will not offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, any of our common stock or securities convertible into or exchangeable or exercisable for any of our common stock, enter into a transaction that would have the same effect, or enter into any swap or other arrangement that transfers, in whole or in part, any of the economic consequences of ownership of our common stock, whether any of these transactions are to be settled by delivery of our common stock or other securities, in cash or otherwise, or publicly disclose the intention to make any offer, sale, pledge or disposition, or to enter into any transaction, swap, hedge or other arrangement, without, in each case, the prior written consent of Morgan Stanley & Co. LLC, BofA Securities, Inc. and Cowen and Company, LLC, who may release any of the securities subject to these lock-up agreements at any time without notice.

We are no longer an “emerging growth company” and, as a result, are subject to certain enhanced disclosure requirements.

Because the market value of our common stock held by non-affiliates exceeded $700.0 million as of June 30, 2020, among other things, we no longer qualified as an emerging growth company as of December 31, 2020. As a result, commencing January 1, 2021, we are subject to certain requirements that apply to other public companies but did not previously apply to us due to our status as an emerging growth company, such as the auditor attestation requirements under Section 404 of the Sarbanes Oxley Act of 2002, as amended. Compliance with these enhanced disclosure requirements will increase our costs and could negatively affect our results of operations and financial condition.

We may be at an increased risk of securities class action litigation.

Historically, securities class action litigation has often been brought against a company following a decline in the market price of its securities. This risk is especially relevant for us because biotechnology and pharmaceutical companies have experienced significant stock price volatility in recent years. If we were to be sued, it could result in substantial costs and a diversion of management’s attention and resources, which could harm our business.

We do not intend to pay dividends on our common stock and, consequently, your ability to achieve a return on your investment will depend on appreciation in the price of our common stock.

We have never declared or paid any cash dividends on our common stock and do not currently intend to do so in the foreseeable future. We currently anticipate that we will retain future earnings for the development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends in the foreseeable future. Therefore, the success of an investment in shares of our common stock will depend upon any future appreciation in their value. There is no guarantee that shares of our common stock will appreciate in value or even maintain the price at which you purchased them.

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Provisions in our certificate of incorporation and bylaws and Delaware law might discourage, delay or prevent a change in control of our company or changes in our management and, therefore, depress the market price of our common stock.

Our certificate of incorporation and bylaws contain provisions that could depress the market price of our common stock by acting to discourage, delay or prevent a change in control of our company or changes in our management that the stockholders of our company may deem advantageous. These provisions, among other things:

●

establish a classified board of directors so that not all members of our board are elected at one time;

●

permit only the board of directors to establish the number of directors and fill vacancies on the board;

●

provide that directors may only be removed “for cause” and only with the approval of two-thirds of our stockholders;

●

authorize the issuance of “blank check” preferred stock that our board could use to implement a stockholder rights plan (also known as a “poison pill”);

●

eliminate the ability of our stockholders to call special meetings of stockholders;

●

prohibit stockholder action by written consent, which requires all stockholder actions to be taken at a meeting of our stockholders;

●

prohibit cumulative voting;

●

authorize our board of directors to amend the bylaws;

●

establish advance notice requirements for nominations for election to our board or for proposing matters that can be acted upon by stockholders at annual stockholder meetings; and

●

require a super-majority vote of stockholders to amend some provisions described above.

In addition, Section 203 of the General Corporation Law of the State of Delaware, or the DGCL, prohibits a publicly-held Delaware corporation from engaging in a business combination with an interested stockholder, generally a person which together with its affiliates owns, or within the last three years has owned, 15% of our voting stock, for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner.

Any provision of our certificate of incorporation, bylaws or Delaware law that has the effect of delaying or preventing a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our capital stock and could also affect the price that some investors are willing to pay for our common stock.

Our certificate of incorporation provides that the Court of Chancery of the State of Delaware is the exclusive forum for substantially all disputes between us and our stockholders and our bylaws designate the federal district courts of the United States as the exclusive forum for actions arising under the Securities Act, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.

Our certificate of incorporation provides that the Court of Chancery of the State of Delaware is the exclusive forum for: (i) any derivative action or proceeding brought on our behalf; (ii) any action asserting a claim of breach of fiduciary duty; (iii) any action asserting a claim against us arising under the DGCL, our certificate of incorporation or our bylaws; and (iv) any action asserting a claim against us that is governed by the internal affairs doctrine. In addition, our bylaws provide that the federal district courts of the United States are the exclusive forum for any complaint raising a cause of action arising under the Securities Act. Any person or entity purchasing or otherwise acquiring any interest in any

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of our securities shall be deemed to have notice of and consented to the provisions of our certificate of incorporation and bylaws described above. These exclusive-forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage lawsuits against us and our directors, officers and other employees. If a court were to find these provisions of our certificate of incorporation or bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving the dispute in other jurisdictions, which could seriously harm our business.

General Risk Factors

We may acquire businesses or products, form strategic alliances or create joint ventures in the future, and we may not realize their benefits.

An active market for our common stock may not be maintained.

Our stock began trading on the Nasdaq Global Market in October 2017 and we can provide no assurance that we will be able to continue to maintain an active trading market on the Nasdaq Global Market or any other exchange in the future. If an active market for our common stock is not maintained, it may be difficult for our stockholders to sell shares without depressing the market price for the shares or at all. An inactive market may also impair our ability to raise capital by selling shares and may impair our ability to acquire other businesses, applications or technologies using our shares as consideration.

If securities or industry analysts do not continue to publish research or reports or publish unfavorable research or reports about our business, our stock price and trading volume could decline.

The trading market for our common stock depends in part on the research and reports that securities or industry analysts publish about us, our business, our market or our competitors. We do not control these analysts. If we lose securities or industry analysts coverage of our company, the trading price for our stock would be negatively impacted. If one or more of the analysts who covers us downgrades our stock, our stock price would likely decline. If one or more of these analysts issues unfavorable commentary or ceases to cover us or fails to regularly publish reports on us, interest in our stock could decrease, which could cause our stock price or trading volume to decline.

Raising additional capital may cause dilution to our existing stockholders, restrict our operations or require us to relinquish rights.

We may seek additional capital through a combination of private and public equity offerings, debt financings, collaborations and strategic and licensing arrangements. To the extent that we raise additional capital through the sale of common stock or securities convertible or exchangeable into common stock, a stockholder’s ownership interest in our company will be diluted. In addition, the terms of any such securities may include liquidation or other preferences that materially adversely affect the rights of our stockholders. Debt financing, if available, would increase our fixed payment obligations and may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through collaboration, strategic partnerships and licensing arrangements with third parties, we may have to relinquish valuable

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rights to setmelanotide, our intellectual property or future revenue streams, or grant licenses on terms that are not favorable to us.

~~Sales~~79

Table of ~~a substantial number~~Contents

Unfavorable global economic conditions could adversely affect our business, financial condition or results of ~~shares~~operations.

Our results of ~~our common stock~~operations could be adversely affected by general conditions in the ~~public market~~global economy and in the global financial markets. The global financial crisis caused extreme volatility and disruptions in the capital and credit markets. A severe or prolonged economic downturn, such as the global financial crisis, could result in a variety of risks to our business, including weakened demand for setmelanotide and our ability to raise additional capital when needed on acceptable terms, if at all. A weak or declining economy could also strain our suppliers, possibly resulting in supply disruption, or cause our ~~stock price~~customers to ~~fall.~~

Ifdelay making payments for our existing stockholders sell, or indicate an intention to sell, substantial amounts of our common stock in the public market after the lock-up and other legal restrictions on resale lapse, the trading price of our common stock could decline. Based upon the number of shares outstanding as of September 30, 2017, and after giving effect to the closing of our IPO in October 2017, we had outstanding a total of approximately 27.3 million shares of common stock. Of these shares, approximately 7.2 millionservices. Any of the ~~shares of~~foregoing could harm our ~~common stock sold in the IPO are freely tradable, without restriction, in the public market.~~

The lock-up agreements pertaining to our IPO will expire on April 2, 2018, following which up to an additional 19.2 million shares of common stock will be eligible for sale in the public market, of which approximately 13.0 million shares are held by current directors, executive officersbusiness and their respective affiliates and may be subject to Rule 144 under the Securities Act. The underwriters from our IPO may, however, in their sole discretion, permit our officers, directors and other stockholders who are subject to these lock-up agreements to sell or transfer shares prior to the expirationwe cannot anticipate all of the ~~lock-up agreements.~~

In addition, approximately 4.0 million shares of our common stock that are either subject to outstanding stock awards or reserved for future issuance under our 2017 Plan are eligible for sale in the public market to the extent permitted by the provisions of various vesting schedules and Rule 144 and Rule 701 under the Securities Act. If these additional shares of common stock are sold, or if it is perceived that they will be sold, in the public market, the trading price of our common stock could decline.

The holders of approximately 18.9 million shares of our common stock, or approximately 69.1% of our total outstanding common stock as of September 30, 2017 and after giving effect to the issuance of shares in our IPO, will be entitled to rights with respect to the registration of their shares under the Securities Act, subject to vesting schedules and to the lock-up agreements described above. Registration of these shares under the Securities Act would result in the shares becoming freely tradable without restriction under the Securities Act, except for shares purchased by affiliates. Any sales of securities by these stockholders could have a material adverse effect on the trading price of our common stock.

We are an “emerging growth company,” and as a result of the reduced disclosure and governance requirements applicable to emerging growth companies, our common stock may be less attractive to investors.

We are an “emerging growth company” as defined in the JOBS Act, and we intend to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes‑Oxley Act of 2002, as amended, or Section 404, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. If we choose not to comply with the auditor attestation requirements of Section 404, our auditors will not be required to attest to the effectiveness of our internal control over financial reporting. As a result, investors may become less comfortable with the effectiveness of our internal controls and the risk that material weaknesses or other deficiencies in our internal controls go undetected or may increase. If we choose to provide reduced disclosures in our periodic reports and proxy statements while we are an emerging growth company, investors would have access to less information and analysis about our executive compensation, which may make it difficult for investors to evaluate our executive compensation practices. We cannot predict if investors will find our common stock less attractive because we will rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile. We may take advantage of these reporting exemptions until we are no longer an “emerging growth company.” We will remain an “emerging growth company” until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of our IPO, (b)ways in which wethe current economic climate and financial market conditions could adversely impact our business.

We have ~~total annual gross revenue of at least $1.07 billion, or (c) in which we are deemed~~incurred and will continue to ~~be a large accelerated filer, which means the market value of our common stock that is held by non‑affiliates exceeds $700 million as of the prior~~

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~~June 30~~th~~, and (2) the date on which we have issued more than $1.0 billion in non‑convertible debt during the prior three‑year period.~~

~~We will~~ incur ~~increased~~substantial costs as a result of operating as a public company, ~~and~~ our management will ~~be required~~continue to devote substantial time to new compliance initiatives and corporation governance ~~policies.~~policies, and we will need to hire additional qualified accounting and financial personnel with appropriate public company experience.

As a public company, and particularly ~~after~~now that we are no longer an emerging growth company, we have incurred and will continue to incur significant legal, accounting and other ~~expenses that we did not incur as a private company.~~expenses. The ~~Sarbanes‑Oxley~~Sarbanes-Oxley Act of 2002, ~~or Sarbanes‑Oxley,~~ the ~~Dodd‑Frank~~Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of the ~~NASDAQ~~Nasdaq Global Market and other applicable securities rules and regulations impose various requirements on public companies, including establishment and maintenance of effective disclosure and financial controls and corporate governance practices. Our management and other personnel will ~~need~~continue to devote a substantial amount of time to these compliance ~~initiatives.~~initiatives and we will need to continue to hire additional accounting and financial personnel with appropriate public company experience and technical accounting knowledge. Even if we are able to hire appropriate personnel, our existing operating expenses and operations will be impacted by the direct costs of their employment and the indirect consequences related to the diversion of management resources from product development efforts. Moreover, these rules and regulations will continue to increase our legal and financial compliance costs and ~~will~~ make some activities more ~~time‑consuming~~time-consuming and costly. For example, we expect that these rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance, which in turn could make it more difficult for us to attract and retain qualified members of our board of directors.

~~We are evaluating these rules and regulations, and cannot predict or estimate the amount of additional costs we may incur or the timing of such costs.~~ These rules and regulations are often subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in ~~continuing~~future uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices.

~~For as long as~~If we ~~remain~~fail to maintain an ~~emerging growth company,~~effective system of internal control over financial reporting, we may ~~take advantage~~not be able to accurately report our financial results or prevent fraud. As a result, stockholders could lose confidence in our financial and other public reporting, which would harm our business and the trading price of ~~certain exemptions from various~~our common stock.

Effective internal control over financial reporting ~~requirements~~is necessary for us to provide reliable financial reports and, together with adequate disclosure controls and procedures, is designed to prevent fraud. Any failure to implement required new or improved controls, or difficulties encountered in their implementation could cause us to fail to meet our reporting obligations. In addition, any testing by us conducted in connection with Section 404, or any testing by our independent registered public accounting firm, may reveal deficiencies in our internal control over financial reporting that are ~~applicable~~deemed to be material weaknesses or that may require prospective or retroactive changes to our financial statements or identify other ~~public companies that are not applicable to emerging growth companies as described in the preceding risk factor.~~areas for further attention or improvement.

Pursuant to Section 404, ~~of Sarbanes‑Oxley,~~ we ~~will be~~are required to furnish a report by our management on our internal control over financial reporting. ~~However, while we remain an emerging growth company, we will not be required~~To continue to ~~include an attestation report on internal control over financial reporting issued by our independent registered public accounting firm. To~~ achieve compliance with Section 404, ~~within the prescribed period,~~ we ~~will~~continue to be engaged in a process to document and evaluate our internal control over financial reporting, which is both costly and challenging. In this regard, we will need to continue to dedicate internal resources, potentially engage outside consultants and adopt a detailed work plan to assess and document the adequacy of internal control over financial reporting, continue steps to improve control processes as appropriate, validate through testing that controls are functioning as documented and implement a continuous reporting and improvement process for internal control over financial reporting. Despite our efforts, there is a risk that we will not be able to conclude ~~within the prescribed timeframe or at all,~~ that our internal control over financial reporting is effective as required by Section 404.

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In addition, because we no longer qualify as an emerging growth company as of December 31, 2020, we are required to include an attestation report on internal control over financial reporting issued by our independent registered public accounting firm. If we ~~identify one~~are unable to maintain effective internal control over financial reporting, we may not have adequate, accurate or ~~more material~~timely financial information, our independent registered public accounting firm may issue a report that is adverse, and we may be unable to meet our reporting obligations as a public company or comply with the requirements of the SEC or Section 404. This could result in a restatement of our financial statements, the imposition of sanctions, including the inability of registered broker dealers to make a market in our common stock, or investigation by regulatory authorities. Any such action or other negative results caused by our inability to meet our reporting requirements or comply with legal and regulatory requirements or by disclosure of an accounting, reporting or control issue could adversely affect the trading price of our securities and our business. Material weaknesses in our internal control over financial reporting itcould also reduce our ability to obtain financing or could increase the cost of any financing we obtain. This could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements.

~~We may be at an increased risk of securities class action litigation.~~

~~We do not intend to pay dividends on our common stock and, consequently, your ability to achieve a return on your investment will depend on appreciation in the price of our common stock.~~

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the success of an investment in shares of our common stock will depend upon any future appreciation in their value. There is no guarantee that shares of our common stock will appreciate in value or even maintain the price at which you purchased them.

Item 2. Unregistered Sales of Equity Securities and Use of ~~Proceeds.~~Proceeds

Unregistered Sales of Equity Securities

~~During the quarter ended September 30, 2017, we issued and sold the following unregistered securities:~~None.

On August 18, 2017 we issued 20,474,998 shares of series A preferred stock, $0.001 par value per share, to a number of accredited investors for $1.00 per share. These shares were issued in reliance on Regulation D, Rule 506 and/or Rule 4(2) under the Securities Act.

We granted options under the 2015 Plan to purchase an aggregate of 540,996 shares of our common stock to employees, consultants and directors, having exercise prices ranging from $6.88 to $8.44 per share which issuances were exempt from registration under Rule 701 under the Securities Act. During this period, 152,671 stock options were exercised.

Use of Proceeds

On September 25, 2017, the SEC declared effective our registration statement on Form S-1 (File No. 333-220327), as amended, filed in connection with our IPO. The IPO closed on October 10, 2017 and we issued and sold 8,107,500 shares of our common stock at a price to the public of $17.00 per share, which included the exercise in full of the underwriters’ option to purchase 1,057,500 additional shares. We received gross proceeds from the IPO of approximately $137.8 million, before deducting underwriting discounts and commissions of approximately $9.6 million, and estimated offering expenses of approximately $2.4 million. ~~Morgan Stanley, Bank of America Merrill Lynch, Cowen Inc. and Needham & Company acted as book-running managers for the offering.~~ ~~No offering expenses were paid or are payable, directly or indirectly, to our directors or officers, to persons owning 10% or more of any class of our equity securities or to any of our affiliates.~~Not applicable.

The net proceeds from the IPO have been invested in United States treasury money market funds. There has been no material change in the expected use of the net proceeds from our IPO as described in our registration statement on Form S-1.

~~Issuer~~ Purchases of Equity Securities by the Issuer and Affiliated Purchasers

~~We did not repurchase any of our equity securities during the three months ended September 30, 2017.~~None.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosure

Not applicable.

Item 5. Other Information

None.

~~None~~

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Item 6. Exhibits

Incorporated by Reference
Exhibit
Number

Exhibit Description

Form

Date

Number
3.1

Amended and Restated Certificate of Incorporation.

S-1/A

9-25-2017

3.3
3.2

Amended and Restated Bylaws.

S-1/A

9-25-2017

3.5
4.1

Form of Common Stock Certificate.

S-1/A

9-25-2017

4.1
4.2

Amended and Restated Investors’ Rights Agreement, dated August 21, 2017.

S-1

9-5-2017

4.2
10.1

Form of Indemnification Agreement.

S-1/A

9-25-2017

10.1
10.2*†

2017 Equity Incentive Plan and Form of Option Agreement and Notice of Exercise.

10.3†

Offer Letter, dated November 16, 2016, by and between the Registrant and Bart Henderson.

S-1

9-5-2017

10.3
10.4†

Offer Letter, dated November 16, 2016, by and between the Registrant and Keith M. Gottesdiener.

S-1

9-5-2017

10.4
10.5†

Offer Letter, dated November 16, 2016, by and between the Registrant and Fred T. Fiedorek.

S-1

9-5-2017

10.5
10.6

License Agreement, dated March 21, 2013, by and between the Registrant (f/k/a Rhythm Metabolic, Inc.) and Ipsen Pharma S.A.S.

S-1

9-5-2017

10.6
10.7

Development and Manufacturing Services Agreement, dated July 17, 2013, by and between the Registrant (f/k/a Rhythm Metabolic, Inc.) and Peptisyntha Inc. (n/k/a Corden Pharma International).

S-1

9-5-2017

10.7
10.8

License Agreement dated January 4, 2016, by and between the Registrant and Camurus AB

S-1

9-5-2017

10.8
10.9

Amended and Restated Payroll Services Agreement, dated March 21, 2013, by and between the Registrant (f/k/a Rhythm Metabolic, Inc.) and Rhythm Pharmaceuticals, Inc.

S-1

9-5-2017

10.9
10.10*†

Rhythm Pharmaceuticals, Inc. 2017 Employee Stock Purchase Plan.

10.11

Lease, dated November 25, 2015, by and between 500 Boylston & 222 Berkeley Owner (DE) LLC and the Registrant.

S-1

9-5-2017

10.11
10.12

Consulting Agreement, dated June 12, 2017, by and between the Registrant and Bart Henderson.

S-1

9-5-2017

10.12
10.13†

Offer Letter, dated September 13, 2017, by and between the Registrant and Keith M. Gottesdiener.

S-1/A

9-25-2017

10.13
10.14†

Offer Letter, dated September 13, 2017, by and between the Registrant and Fred T. Fiedorek.

S-1/A

9-25-2017

10.14


		Incorporated by Reference
Exhibit Number	Exhibit Description	Form	Date	Number
3.1	Amended and Restated Certificate of Incorporation.	10-Q	05/04/2020	3.1
3.2	Amended and Restated Bylaws.	8-K	12/11/2020	3.1
10.1	Summary of Non-Employee Director Compensation Policy.	10-K	03/01/2021	10.5
31.1*	Certification of the Principal Executive Officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).
31.2*	Certification of the Principal Financial Officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).
32.1**	Certification of the Principal Executive Officer, as required by Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).
32.2**	Certification of the Principal Financial Officer, as required by Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).
101.INS*	Inline XBRL Instance Document - the Instance Document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document.
101.SCH*	Inline XBRL Taxonomy Extension Schema Document.
101.CAL*	Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF*	Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB*	Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE*	Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104*	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

* Filed herewith.

** Furnished herewith.

8082

Table of Contents

10.15

Development and Manufacturing Services Agreement, dated as of December 21, 2016, by and between Registrant and Recipharm Monts S.A.S.

S-1

9-5-2017

10.15
10.16†

Offer Letter, dated September 13, 2017, by and between the Registrant and Hunter Smith.

S-1/A

9-25-2017

10.18
10.17†

Offer Letter, dated September 13, 2017, by and between the Registrant and Nithya Desikan.

S-1/A

9-25-2017

10.19
10.18†

Summary of Non‑Employee Director Compensation Policy.

S-1

9-5-2017

10.20
10.19†

2015 Equity Incentive Plan and Form of Option Agreement and Notice of Exercise.

S-1/A

9-25-2017

10.21
31.1*

Certification of the Chief Executive Officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).

31.2*

Certification of the Chief Financial Officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).

32.1*

Certification of the Chief Executive Officer, as required by Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).

32.2*

Certification of the Chief Financial Officer, as required by Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).

101.INS*

XBRL Instance Document.

101.SCH*

XBRL Taxonomy Extension Schema Document.

101.CAL*

XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF*

XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB*

XBRL Taxonomy Extension Label Linkbase Document.

101.PRE*

XBRL Taxonomy Extension Presentation Linkbase Document.

* Filed herewith

~~† Indicates management contract or compensatory plan~~

~~Table of Contents~~

~~SIGNATURES~~

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	RHYTHM PHARMACEUTICALS, INC.


Dated: ~~November 14, 2017~~May 3, 2021	By:	/s/ ~~Keith M. Gottesdiener~~David P. Meeker, M.D.
		Name: ~~Keith M. Gottesdiener~~David P. Meeker, M.D.
		Title: President and Chief Executive Officer ~~President and Director~~
		(Principal Executive Officer)

Dated: ~~November 14, 2017~~May 3, 2021	By:	/s/ Hunter C. Smith
		Name: Hunter C. Smith
		Title: Chief Financial Officer and Treasurer
		(Principal Financial ~~and Accounting~~ Officer)

8283


Delaware	~~46‑2159271~~46-2159271
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.001 par value per share	RYTM	The Nasdaq Stock Market LLC (Nasdaq Global Market)


Large accelerated filer ☒	Accelerated filer ☐
~~Large accelerated filer~~ ☐	~~Accelerated filer~~ ☐
Non-accelerated filer ☐
~~Non-accelerated filer~~ ☒	Smaller reporting company ☐
~~(Do not check if a smaller reporting company)~~	Emerging growth company ☒☐


		(Unaudited)
		September 30,	December 31,
	2017		2016

Assets
Current assets:
Cash and cash equivalents	$	27,914	$	6,540
Short-term investments		2,501		3,997
Prepaid expenses and other current assets		1,621		638
Total current assets		32,036		11,175
Property, plant and equipment, net		845		930
Deferred issuance costs		1,698		9
Restricted cash		225		225
Total assets	$	34,804	$	12,339
Liabilities, convertible preferred stock and stockholders’ equity (deficit)
Current liabilities:
Accounts payable	$	2,271	$	1,895
Due to related party		—		105
Deferred rent		81		76
Accrued expenses and other current liabilities		3,108		2,655
Total current liabilities		5,460		4,731
Long-term liabilities:
Deferred rent		250		311
Total liabilities		5,710		5,042
Commitments and contingencies
Preferred stock:
Series A Convertible Preferred Stock, $1.00 par value: 80,950,000 shares authorized; 80,949,999 shares issued and outstanding at September 30, 2017 and 40,000,000 shares issued and outstanding at December 31, 2016; (aggregate liquidation preference of $88,864 and $44,129 at September 30, 2017 and December 31, 2016 respectively)		80,950		40,000
Stockholders’ equity (deficit):
Common stock, $0.001 par value: 29,919,979 shares authorized; 1,770,302 and 10,196,292 shares issued and outstanding and September 30, 2017 and December 31, 2016, respectively		2		10
Series A-1 Convertible Junior Preferred Stock, $0.001 par value, 78,666,209 shares authorized; 78,666,209 and no shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively		79		—
Additional paid-in capital		47,784		43,830
Accumulated deficit		(99,721)		(76,543)
Total stockholders’ equity (deficit)		(51,856)		(32,703)
Total liabilities, convertible preferred stock and stockholders’ equity (deficit)	$	34,804	$	12,339



	March 31,		December 31,
	2021		2020

Assets
Current assets:
Cash and cash equivalents	$	87,271	$	100,854
Short-term investments		317,479		71,938
Prepaid expenses and other current assets		7,384		8,876
Total current assets		412,134		181,668
Property and equipment, net		3,006		3,195
Right-of-use asset		1,741		1,807
Intangible assets, net		5,000		—
Restricted cash		328		403
Total assets	$	422,209	$	187,073
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	9,147	$	4,900
Accrued expenses and other current liabilities		7,150		12,559
Lease liability		553		535
Total current liabilities		16,850		17,994
Long-term liabilities:
Deferred tax liability		22,006		—
Lease liability		2,406		2,551
Total liabilities		41,262		20,545
Commitments and contingencies (Note 5)
Stockholders’ equity:
Preferred Stock, $0.001 par value: 10,000,000 shares authorized; 0 shares issued and outstanding at March 31, 2021 and December 31, 2020		—		—
Common stock, $0.001 par value: 120,000,000 shares authorized; 50,201,758 and 44,235,903 shares issued and outstanding March 31, 2021 and December 31, 2020, respectively		50		44
Additional paid-in capital		796,532		625,762
Accumulated other comprehensive (loss) income		(58)		49
Accumulated deficit		(415,577)		(459,327)
Total stockholders’ equity		380,947		166,528
Total liabilities and stockholders’ equity	$	422,209	$	187,073


			Page No.
PART I	FINANCIAL INFORMATION

	Item 1. Condensed Consolidated Financial Statements (Unaudited)		3
3
	Condensed Consolidated Balance Sheets		3

	Condensed ~~Balance Sheets~~		3

	~~Condensed~~Consolidated Statements of Operations and Comprehensive ~~Loss~~Income (Loss)		4


	Condensed Consolidated Statements of Stockholders’ Equity		5
4


	Condensed ~~Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit)~~		5

	~~Condensed~~Consolidated Statements of Cash Flows		6
6

	Notes to Unaudited Condensed Consolidated Financial Statements		7
7

	Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations		17
19

	Item 3. Quantitative and Qualitative Disclosures About Market Risk		26
30

	Item 4. Controls and Procedures		30 26

PART II	OTHER INFORMATION		27
31

	Item 1. Legal Proceedings		27
31

	Item 1A. Risk Factors		27
31

	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		81
79

	Item 3. Defaults Upon Senior Securities		81
79

	Item 4. Mine Safety Disclosure		81
79

	Item 5. Other Information		81
79
	Item 6. Exhibits		82
		~~Item 6. Exhibits~~		80

SIGNATURES			82 83



	Three months ended September 30,				Nine months ended September 30,
	2017		2016		2017		2016
Operating expenses:
Research and development	$	5,971	$	5,419	$	16,241	$	13,963
General and administrative		2,315		982		5,188		3,567
Total operating expenses		8,286		6,401		21,429		17,530
Loss from operations		(8,286)		(6,401)		(21,429)		(17,530)
Other income (expense):
Revaluation of Series A Investor Instrument		(1,781)		—		(1,863)		—
Interest income, net		51		10		114		24
Total other income (expense):		(1,730)		10		(1,749)		24
Net loss and comprehensive loss	$	(10,016)	$	(6,391)	$	(23,178)	$	(17,506)
Net loss attributable to common stockholders	$	(11,429)	$	(7,191)	$	(26,963)	$	(19,902)
Net loss attributable to common stockholders per common share, basic and diluted	$	(1.78)	$	(0.71)	$	(3.02)	$	(1.95)
Weighted average common shares outstanding, basic and diluted		6,404,254		10,196,292		8,918,389		10,196,292


															Total
	Series A Convertible						Series A-1 Junior				Additional				Stockholders’
	Preferred Stock			Common Stock			Preferred Stock				Paid-In		Accumulated		Equity
	Shares	Amount		Shares	Amount		Shares		Amount		Capital		Deficit		(Deficit)
Balance at December 31, 2015	40,000,000	$	40,000	10,196,292	$	10	—	$	—	$	42,662	$	(50,671)	$	(7,999)
Stock compensation expense	—		—	—		—	—		—		1,168		—		1,168
Net loss	—		—	—		—	—		—		—		(25,872)		(25,872)
Balance at December 31, 2016	40,000,000		40,000	10,196,292		10	—		—		43,830		(76,543)		(32,703)
Stock compensation expense	—		—	—		—	—		—		1,569		—		1,569
Issuance of common stock in connection with exercise of stock options	—		—	152,671		—	—		—		700		—		700
Change in unrealized loss on marketable securities	—		—	—		—	—		—		1		—		1
Issuance of Series A Convertible Preferred Stock	40,949,999		40,622	—		—	—		—		(108)		—		(108)
Settlement of Series A investor instrument	—		328	—		—	—		—		1,863		—		1,863
Exchange of common stock held by LLC entity for Series A-1 Junior Preferred Stock	—		—	(8,578,661)		(8)	78,666,209		79		(71)		—		—
Net loss	—		—	—		—	—		—		—		(23,178)		(23,178)
Balance at September 30, 2017(unaudited)	80,949,999	$	80,950	1,770,302	$	2	78,666,209	$	79	$	47,784	$	(99,721)	$	(51,856)


						Accumulated
				Additional		Other				Total
	Common Stock			Paid-In		Comprehensive		Accumulated		Stockholders’
	Shares	Amount		Capital		Income (Loss)		Deficit		Equity


Balance at December 31, 2020	44,235,903	$	44	$	625,762	$	49	$	(459,327)	$	166,528
Stock compensation expense	—		—		5,191		—		—		5,191
Issuance of common stock in connection with ESPP	17,000		—		388		—		—		388
Issuance of common stock in connection with exercise of stock options and vesting of restricted stock units	198,855		—		3,466		—		—		3,466
Issuance of common stock upon completion of public offering, net of offering costs	5,750,000		6		161,725		—		—		161,731
Unrealized loss on marketable securities	—		—		—		(107)		—		(107)
Net income	—		—		—		—		43,750		43,750
Balance at March 31, 2021	50,201,758	$	50	$	796,532	$	(58)	$	(415,577)	$	380,947

Balance at December 31, 2019	43,996,753	$	44	$	606,307	$	—	$	(325,331)	$	281,020
Stock compensation expense	—		—		5,475		—		—		5,475
Issuance of common stock in connection with ESPP	18,673		—		324		—		—		324
Issuance of common stock in connection with exercise of stock options	72,964		—		383		—		—		383
Unrealized gain on marketable securities	—		—		—		63		—		63
Net loss	—		—		—		—		(34,164)		(34,164)
Balance at March 31, 2020	44,088,390	$	44	$	612,489	$	63	$	(359,495)	$	253,101


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2017		2016		2017		2016
Numerator:
Net loss	$	(10,016)	$	(6,391)	$	(23,178)	$	(17,506)
Cumulative dividends on convertible preferred shares		(1,413)		(800)		(3,785)		(2,396)
Loss attributable to common shares—basic and diluted	$	(11,429)	$	(7,191)	$	(26,963)	$	(19,902)
Denominator:
Weighted-average number of common shares—basic and diluted		6,404,254		10,196,292		8,918,389		10,196,292
Loss per common share—basic and diluted	$	(1.78)	$	(0.71)	$	(3.02)	$	(1.95)


	Fair value Measurements as of
	September 30, 2017 using:
	Level 1		Level 2		Level 3		Total
Assets:
Cash Equivalents:
Government Funds	$	—	$	—	$	—	$	—
Money Market Funds		26,221		—		—		26,221
Marketable Securities:
Government Funds		2,501		—		—		2,501
Total	$	28,722	$	—	$	—	$	28,722
Liabilities:
2017 Series A Investor Instrument	$	—	$	—	$	—	$	—
Total	$	—	$	—	$	—	$	—


	Fair value Measurements as of
	December 31, 2016 using:
	Level 1		Level 2		Level 3		Total

									Fair value Measurements as of
									March 31, 2021 using:
									Level 1		Level 2		Level 3		Total
Assets:
Cash Equivalents:
Government Funds	$	2,000	$	—	$	—	$	2,000
Commercial Paper									$	—	$	4,750	$	—	$	4,750
Money Market Funds		1,987		—		—		1,987		81,365		—		—		81,365
Marketable Securities:
Government Funds		3,997		—		—		3,997
Corporate Debt Securities and Commercial Paper										—		317,479		—		317,479
Total	$	7,984	$	—	$	—	$	7,984	$	81,365	$	322,229	$	—	$	403,594


	Fair value Measurements as of
	December 31, 2020 using:
	Level 1		Level 2		Level 3		Total
Assets:
Cash Equivalents:
Corporate Debt Securities and Commercial Paper	$	—	$	36,242	$	—	$	36,242
Money Market Funds		63,182		—		—		63,182
Marketable Securities:
Corporate Debt Securities and Commercial Paper		—		71,938		—		71,938
Total	$	63,182	$	108,180	$	—	$	171,362


	September 30, 2017
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
Assets
Government Funds (due within 1 year)	$	2,502	$	—	$	(1)	$	2,501
	$	2,502	$	—	$	(1)	$	2,501


	December 31, 2016
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value

									March 31, 2021
											Gross		Gross
									Amortized		Unrealized		Unrealized		Fair
									Cost		Gains		Losses		Value
Assets
Government Funds (due within 1 year)	$	3,997	$	—	$	—	$	3,997
	$	3,997	$	—	$	—	$	3,997
Corporate debt securities and commercial paper (due within 1 year)									$	317,538	$	1	$	(60)	$	317,479
									$	317,538	$	1	$	(60)	$	317,479


	Operating Lease
Remainder of 2021	$	603
2022		818
2023		834
2024		851
2025		502
Thereafter		—
Total operating lease payments		3,608
Less: imputed interest		649
Total operating lease liability	$	2,959


	December 31, 2020
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
Assets
Corporate debt securities and commercial paper (due within 1 year)	$	71,895	$	43	$	—	$	71,938
	$	71,895	$	43	$	—	$	71,938


	~~2017 Series A Investor~~
	~~Instrument~~
~~Fair value at December 31, 2016~~	$	—
~~Fair value upon the January 2017 Initial Closing, net~~		~~328~~
~~Change in fair value through the date of settlement~~		~~1,863~~
~~Reclassification of liability upon August 2017 Second Tranche Closing~~		~~(2,191)~~
~~Fair value at September 30, 2017~~	$	—


	August 2017 Second Tranche Closing
Series A Convertible Preferred Stock Exercise Price	$	1.00
Series A Convertible Preferred Stock Fair Value	$	1.33
Expected term		1.5 months
Expected volatility		64.0	%
Expected interest rate		0.95	%
Expected dividend yield		—


	Operating Lease
2017	$	73
2018		298
2019		305
2020		311
2021		131
Total		1,118

10.15	Development and Manufacturing Services Agreement, dated as of December 21, 2016, by and between Registrant and Recipharm Monts S.A.S.	S-1	9-5-2017	10.15
10.16†	Offer Letter, dated September 13, 2017, by and between the Registrant and Hunter Smith.	S-1/A	9-25-2017	10.18
10.17†	Offer Letter, dated September 13, 2017, by and between the Registrant and Nithya Desikan.	S-1/A	9-25-2017	10.19
10.18†	Summary of Non‑Employee Director Compensation Policy.	S-1	9-5-2017	10.20
10.19†	2015 Equity Incentive Plan and Form of Option Agreement and Notice of Exercise.	S-1/A	9-25-2017	10.21
31.1*	Certification of the Chief Executive Officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).
31.2*	Certification of the Chief Financial Officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).
32.1*	Certification of the Chief Executive Officer, as required by Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).
32.2*	Certification of the Chief Financial Officer, as required by Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).
101.INS*	XBRL Instance Document.
101.SCH*	XBRL Taxonomy Extension Schema Document.
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB*	XBRL Taxonomy Extension Label Linkbase Document.
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document.

Three Months Ended

March 31,

Research and development summary

Research and development expense